It's not just the acoustic properties of dynamic-compressed music. The compression forces music to be more simplistic, because there's less "room" for complexity. Michael Jackson's "Thriller" is a standard pop hit, engineered for chart performance and not artistic virtuosity, but it is still a rich, deep, satisfying piece of music to listen to in part because there's a whole lot of stuff going on. If you tried to cram that many instrument parts into a modern Katy Perry tune, it would clip like crazy and become unlistenable hash.
I mostly play acoustic instruments now, but I discovered what you were talking about when I used to make electronic music. I'd naively use some heavy compression for loudness, but as I added more parts things would get quite muddled. I'm no great audio engineer so maybe something else was the cause, but I'm pretty sure this was it.
