You may already know about this, but in case you don't...
TestStand defines certain custom attributes you can tag your parameters with in your IDL file, to give TS more info about how to handle them than a type-library normally provides. Reference this KnowledgeBase article:
Title: How Do I Create a Type Library Using Visual C++?
KnowledgeBase ID: 1P68ATSR
In the end, you want to get TestStand to choose "C String Buffer" as the type of the parameter. "C String Buffer" can be modified from the DLL, "C String" cannot.
- Ron