When I originally posted the question, my colleague Jim Schmerl and I had just discovered a major gap (as well as a fix for the gap) in the proof of a "classical" characterization (1975) by Barwise and Schlipf of recursively saturated models of PA (Peano arithmetic). This result of Barwise and Schlipf inaugurated the study of recursivey saturated models of PA, a topic that boasts a rich literature.
More specifically, the aforementioned Barwise-Schlipf theorem states:
Theorem. The following are equivalent for a nonstandard model $M$ of PA:
(1) $M$ is recursively saturated.
(2) There is $\mathfrak{X}$ such that $(M,\mathfrak{X})$ satisfies $\Delta^1_1$-Comprehension.
This recently published paper of Schmerl and me shows that the Barwise-Schlipf proof of $(2)\implies(1)$ has a serious gap. This problematic direction is established via an alternative argument in our paper usesusing a coding method introduced by Kaufmann and Schmerl (1984).
For nonexperts: this recent note by John Baez on recursive saturation sings the praises of recursively saturated models of PA.