I'm a little late to the party, but I have your answer. It works like this in 1.0.5:

The weapon tooltip DPS is straight damage, no elemental modifier. For example, I have a Schaefer's Hammer with the following tooltip stats:

DPS: 1,081.4

875–1290 Damage

1.00 Attack Speed

+224–578 Lightning Damage

Adds 8% to Lightning Damage

Increases Attack Speed by 11%

This weapon has a base damage of 651–712 and lightning damage of 224–578. The average damage per hit is (875 + 1,290)/2, or 1,082.5. The weapon's base attack speed is 0.90, which is then multiplied by 1.11 to account for the 11% IAS bonus. This produces a final attack speed of 0.999, which is then multiplied by the 1,082.5 damage per hit to produce a DPS of 1,081.4175 and a rounded tooltip DPS of 1,081.4, which matches what I see in the character sheet.

When calculating your character sheet DPS, however, D3 handles this weapon's affixes (and your gear affixes) quite differently. For starters, the elemental damage bonus is applied to your base damage—what some players call "black damage"—which means that it applies only to the 651–712 portion of the weapon's tooltip range. This is similar to the

*+X% Damage* affix in that it applies only to the weapon's base damage, but it is different in that the +X% Damage affix is included in your tooltip DPS.

Next, the elemental damage bonus is applied to any +X Minimum Damage, +X Maximum Damage, and +X–Y Damage affixes on your gear, which is to say your rings and amulet. This is very different from the way the game treats a weapon's +X% Damage affix, which does

*not* apply to your gear affixes.

Using these rules, I can correctly calculate my character sheet DPS of 25,032.60 with the following equipment:

Schaefer's Hammer:

875–1290 Damage

1.00 APS (actually 0.90 with the +11% modifier applied)

+224–578 Lightning Damage

Adds 8% to Lightning Damage

Increases Attack Speed by 11%

Ring #1:

+25 Minimum Damage

Increases Attack Speed by 7%

Ring #2:+34 Maximum Damage

Amulet:

+24–56 Damage

Increases Attack Speed by 9%

The real damage per hit is the base damage (including rings) multiplied by 1.08 plus the lightning damage.

**Base damage per hit:** (651 + 712 + 25 + 34 + 24 + 56) * 1.08 / 2 = 811.08**Lightning damage:** (224 + 578) / 2 = 401**Total damage per hit:** 811.08 + 401 = 1,212.08

The weapon's real attack speed, with the Enchantress in tow, is actually 1.19364:

0.90 (base AS)

x 1.11 (+11% IAS on weapon)

= 0.999

+ 0.03 (Enchantress buff)

= 1.029

x 1.16 (+7% IAS on ring #1 and +9% IAS on amulet)

= 1.19364

So the weapon's real DPS is 1,212.08 damage per attack times 1.19364 attacks per second, or 1,446.7871712.

Next, we multiply by 1 plus my DEX divided by 100. My DEX is 1,337, so:

1,446.7871712 DPS

x (1 + 1,337 / 100)

= 20,790.331650144

Finally, we need to account for my 26.5% CHC and my 77% CHD, which entails multiplying the 20K-ish figure by (1 + 0.265 x 0.77), or 1.20405.

20,790.331650144

x 1.20405

= 25,032.59882335588

D3 rounds this figure to the nearest hundredth, which accounts for the 25,032.60 I see in my character sheet with this setup.