.. but you're not going to have nearly that much volume loss when blending 1 L of 10% ethanol with 1 L of water, are you?
No. I made a stupid mistake in the math. For 10% diluted 1:1 the numbers are:
For 1 L of solution of ABV 10.00 percent diluted with 1.000 liters of water; 20.00 °C
Desnsity of solution: 0.984710 gram/cc
Mass of 1 L of solution: 984.7104 grams
Volume of EtOH: 100.0000 cc
Mass of EtOH: 78.9239 grams
Mass of H2O: 905.7865 grams
Volume of H2O 907.4187 cc
Volume of EtOH + volume of H2O: 1007.4187 cc; Volume 'loss' 7.419 cc
Volume of dilution water 1000.00
Mass of dilution water 998.2012
Total mass of water: 1903.9877
Total volume of water: 1907.4187
Total mass: 1982.9117
ABW (mass of EtOH/total_mass) 3.9802 percent
ABV 4.9980 percent
Density of diluted solution: 0.9911
Volume of diluted solution 2000.8031
Volume of EtOH + Volume of H2O: 2007.4187; Volume 'loss' 6.616 cc
Thus the ABV is very close to what the linear assumption would have shown and for all intents and purposes you can just use the linear approximation.
Now on the other hand if you are doing this for the TTB from 160 proof spirits:
For 1 L of solution of ABV 80.00 percent diluted with 1.000 liters of water; 20.00 °C
Desnsity of solution: 0.859270 gram/cc
Mass of 1 L of solution: 859.2696 grams
Volume of EtOH: 800.0000 cc
Mass of EtOH: 631.3915 grams
Mass of H2O: 227.8781 grams
Volume of H2O 228.2887 cc
Volume of EtOH + volume of H2O: 1028.2887 cc; Volume 'loss' 28.289 cc
Volume of dilution water 1000.00
Mass of dilution water 998.2012
Total mass of water: 1226.0793
Total volume of water: 1228.2887
Total mass: 1857.4708
ABW (mass of EtOH/total_mass) 33.9920 percent
ABV 40.7774 percent
Density of diluted solution: 0.9468
Volume of diluted solution 1961.8705
Volume of EtOH + Volume of H2O: 2028.2887; Volume 'loss' 66.418 cc
The difference here is appreciable - more than they allow.