Can't listen to the clip right now, but from the description it sounds like a tape delay effect where the delay time is continuously decreased while possibly increasing feedback. Does the pitch shift upwards as well? I'll have to take a listen later to confirm.
You could achieve this with absynth, using one of its sample based oscillators and loading whatever sound you choose, choose the loop point of the sample, I.e. where the sample begins and ends, and modulate the loop speed with an envelope.
Don't worry, there's nothing wrong with your analysis of the technique, but Kontakt's probably the worst choice for this; Ableton Live's Simpler makes it really easy, because it allows you to automate the loop point position. I even managed to crash Kontakt in the process of moving the loop points, and it doesn't do so fluidly either.
However, since you have Cubase, you'll have to find an alternative - Vember Audio ShortCircuit 1.1.2 is nice (and free!), but I've tried to find a way to automate the loop position, and it didn't work. So, if you don't mind manually moving the position with the mouse, then you can achieve this result (see attachment).
you have to add more modulators in Kontakt to double even triple the amount of speed you get, also turning off 'lag' will give you the matrix style effect when the speed gets really fast, 'lag' is interpolation of the samples at each new speed, more=smoother, which you dont want...
or you can use timestretch envelopes direct in the arrange page..
The sound goes higher because of the latency of decreasing the time between the next sound being triggered. The actual timbre of that sound isn't changing but the speed of the reptition/re-triggering creates a higher pitch as you are hearing less and less of the initial attack. There are a number of ways of achieving the effect as mentioned above. Whether it's delay, sampling it into a drum machine, using a retrigger effect, or increasing loop speed - a little experimentation will give you the results you want. The pitch goes up smoothly in the IM example which means they aren't triggering a pattern that goes 2x 4x 8x etc or you would hear the pitch jump as the speed switches. You need a way of increasing the speed of the loop evenly. You hear this effect a lot in live sets by button pusher DJs that use dblue Glitch or Izotope Stutter etc.
They probably didn't but I use trackers for all sorts of this type of strange sample mangling. Dblue is actually an oldie tracker and codes for the Renoise team now. In fact, the funny thing is Glitch originally started out as an inside joke for all of the tracker musicians laughing at people who don't glitch by hand with step based automation, sample retriggers, etc which is easy as pie if you know the commands and can do addition/subtraction in 0-9 and a-f.