No, it's not adding a gain stage.
Took me a while to figure it out; I'm out of practice reading schematics.
What's going on is this: R150 provides negative feedback for Q108. As the Sustain control is turned up, the amount of negative feedback through R150 is decreased, and feedback is supplied through the CR103/CR104 leg. This decreases the total amount of negative feedback, increasing the gain of the Q108 stage. Above a certain voltage, the diodes provide more feedback, reducing the gain, effectively clipping the signal.
So, not another gain stage, but more gain to a certain point, then distortion.
I haven't looked at the Distortion circuit, but the waveforms on the schematic indicate that it adds asymmetrical, odd-order harmonics, while the Sustain circuit adds symmetrical, even-order harmonics.