This is me theorizing, but also curious if anyone with more technical expertise can provide some insight.
I first got into DSD in the early 2000s with a Pioneer DV-45a disc player and a small collection of SACDs. I had just started interning at analog capable recording studios and was really impressed that my budget system sounded so much like what I was hearing in the studio. Eventually one studio I was working at as an assistant purchased a Tascam DV-RA1000 DSD recorder and that cheap box at 2.8mhz, put our 1/4" stereo machine and digital stereo recorders out to pasture. Years later, I bought my own Korg MR-1000 and Tascam DA-3000, double rate capable DSD recorders, and despite their cheap build, tape and vinyl transfers sounded extremely authentic.
In those days the main gripe I had with DSD of all sorts was that the dynamic range was a bit compressed, and the high frequencies always seemed a bit dark and smeared off. But everything else was great, and the tradeoff was not so bad at DSD128.
However, with modern DSD capable DACs, and ADCs, the sound I hear reminds me more of PCM in some key ways. It started in an obvious way with the Merging Horus professional system, and then consumer ESS chip DACs that convert 1 bit DSD to 6 bit. But now most of the FPGA single bit DACs I’ve heard do it as well.
Of DSD capable DACs I’ve owned recently, Mytek Manhattan II (ESS9038), PS Audio DSS, and EMM Labs DA2, each sounded a bit less direct and three dimensional than the cheap old Burr-Brown chip devices I was used to, but perform better. This surprised me most with the EMM Labs because my most coveted SACDs were all mastered with their ADCs. Bucking the trend, some multibit DSD schemes, like DCS’ 5 bit version actually sound excellent, although I’m not a fan of their PCM or upsampling.
The old tradeoff has balanced though, DSD and DSD upsampling no longer darkens or smears the top end, and the dynamic range has improved. More hifi, high performance attributes, but less “straight from tape” character. Modern DSD DACs are ultra smooth, low fatigue, detail machines.
My theory is in the hifi market, that loss of high frequency is unacceptable, so newer DSD designs use a lot more noise shaping (negative feedback to increase audio band dynamic range). This seems especially important for PCM-DSD upsampling, where the customer would be disappointed if it seemed like their old collection actually lost something in the DSD conversion. But like any negative feedback, some of the raw and 3D character is lost.
It seems a bit analogous to NOS DACs in the PCM world: they perform objectively worse, but losing the digital filter sounds subjectively more “analog” and raw.