What does MN 18's "delineate a delineation" phrase mean?

It appears the phrase "paññattiṃ paññāpessatīti" (translated by Thanissaro as "delineate a delineation") from MN 18 is not connecting 'papanca' ('objectification') with dependent origination. Instead, it appears the word "paññāpessatīti" is merely saying when what is known as contact is known, feeling can be known (etc, etc). In others words, the word "paññāpessatīti" itself does not appear to be a synonym for 'pananca' ('monkey chatter').

It’s simply impossible to reject this basic principle of contentment, and point out a true ascetic or brahmin who covets sensual pleasures with acute lust.

So vata, paribbājakā, anabhijjhaṃ dhammapadaṃ paccakkhāya abhijjhāluṃ kāmesu tibbasārāgaṃ samaṇaṃ vā brāhmaṇaṃ vā paññāpessatīti netaṃ ṭhānaṃ vijjati.

AN 4.30

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When there is the eye (cakkhusmiṃ), sights (rūpe) and eye consciousness (cakkhuviññāṇe), it exist (vijjati) possible (ṭhānametaṃ) to point out (paññāpessatīti) what’s known (paññattiṃ) as ‘contact’ (phassa).

MN 18

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paññatti feminine making known, manifestation, description, designation, name, idea notion, concept

Its probably best to stick with Bodhi's or Sujato's translations and avoid Thanissaro's Mahayana tendencies (as found in his erroneous translation of MN 1).

When there is the eye, a form, and eye-consciousness, it is possible to point out the manifestation of contact. When there is the manifestation of contact, it is possible to point out the manifestation of feeling. When there is the manifestation of feeling, it is possible to point out the manifestation of perception... (Bodhi)

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When there is the eye, sights, and eye consciousness, it’s possible to point out what’s known as ‘contact’. (Sujato)

Ven. Bodhi's MN 18 version:

"When there is the eye, a form, and eye-consciousness, it is possible to point out the manifestation of contact.233 When there is the manifestation of contact, it is possible to point out the manifestation of feeling. When there is the manifestation of feeling, it is possible to point out the manifestation of perception..."

and footnote:

The Pali idiom phassapaññattiª paññ›pessati, in which the verb takes an object derived from itself, is difficult. Ñm originally rendered “that one will describe a description of contact.” “To point out a manifestation” is less literal, but it should do justice to the meaning without jeopardising intelligibility. MA says that this passage is intended to show the entire round of existence (va˛˛a) by way of the twelve sense bases; §18 shows the cessation of the round (viva˛˛a) by the negation of the twelve sense bases.

Prof. Piya Tan shares similar explanation:

So vat‟āvuso cakkhusmi sati rpe sati cakkhu,viāe sati phassa,paatti paāpessatîti hāna. Comy says that this passage shows the entire round of existence (vaā) by way of the 12 sense-bases. The next section [§18] shows the cessation of the round (vivaa) by the negation of the 12 sense-bases. (MA 2:78). The structure paatti paāpessati (lit “he describes the description,” “he defines the definition”) is idiomatic, meaning simply “he describes; he defines.” Paraphrased, this sentence may also read “It is possible to define contact as the meeting of sense-organ, sense-object and sense-consciousness.”

Your understanding is correct that this passage links Papanca with Dependent Origination.

The phrase they translate as "delineate a delineation" is what I would translate as "notion of X is getting established" or "concept X gets manifested" or "phenomenon X emerges", or "experience of X is experienced".

The phrase they translate as "it is possible", I would translate "this is possible to see" or "this can be understood". In my opinion, it's not part if the explanation of what's happening, instead it's a comment Buddha makes about us students.

Altogether, in my understanding, X-paññattiṃ-paññāpessatīti-ṭhānametaṃ-vijjati means [the phenomenon X]-[emerges]-[this can be]-[understood]

The significance of "phenomenon ... emerges" here is to emphasize that we are talking about the subjective experience slowly forming, we are talking about representation. So the Contact, Vedana, etc. refer to subjective experiences taking shape.

For example, the Contact is not the physical contact between the object and the sensory organ - it is the emergent experience of "contact" experienced "in the mind". Same goes for Vedana, Sanjna, and Vitakka.

As the representation develops from complete nondifferentiation to complete individuation, each new phenomenon takes shape and serves as a foundation for the next dependent phenomenon to emerge.

In other words, from interaction of physical and mental processes there arises the representational phenomenon of "contact with an external object", only when Contact has been established and reified, can the next phenomenon, "the result of the contact" (i.e. Vedana), be experienced. Then, once both Contact and Result can be experienced, mind learns to associate the identifying feature of the object with the feeling it causes. This is Sanjna (Pali "Sanna"). Now when the "sign" of the object is recognized, the feeling is remembered. Once this ability develops, the next phenomenon, Vitakka can emerge. This is when the mind can recall the image of the object together with the feeling it brings. The vicara of this vitakka is what's known as tanha or craving. When this is established, the next step is Papanca or turning the idea about an object and the feeling it brings into an impulse or intent to pursue and acquire the object in order to experience the feeling. This fantasy about being there with the object, experiencing the nice feeling is what creates Becoming. First there's fantazy about the desired state, then goal-driven action to get it, then the past and present are connected together to create an idea of Self going from point A to point B.