Yes, you are correct, this tree does show it as a sister branch. Then again, we need to add a lot more pygmies to the tree, ;)
Read the paper and you'll see there are several other characters that place D.meristocaulis among the pygmies (chromosome number, pollen, glands...). The only characters that differ are the lack of gemmae, sessile flowers, and geography.
Either way, D.meristocaulis is at least very closely related to pygmies - much more so than any other sundew. And *that* is the truly amazing thing about this species, considering where it grows.