A lot of it has to do with maxing out the volume for radio playback. And if it is actually heard on the radio, it is more likely to sell. So it makes good business sense for them to do this.
As for why people put up with it, I basically don't. I don't buy the poorly made crap that comes out. But my choice has little impact on the matter, as there are plenty of people who do buy crap, and so there is plenty of crap made.
If people only bought things that were good, this would greatly decrease the amount of crap made, and would increase the amount of good things made. But this is a business, and making what sells is what makes the most sense for them to do. And so they make plenty of crap, because people buy crap.
As for being up in arms, the only thing that matters are sales. You can complain all you want, but if you still buy the crap, your complaint means nothing to them. They still got your money, and that was the point of making it in the first place. The only real leverage that people have is in their buying choices. If they do not use that leverage, then the companies will continue to do what achieves their goal of making money.
As for your anecdote, I remember listening to something in my car on the radio that was recorded in the 1950's. It was mono, but I was amazed at the sound quality. The DJ explained how it was recorded, and that explained why it was so good. The person in charge was interested in the best sound he could get. It was recorded with one very high quality microphone, and all the musicians simply gathered around it to play. So there was no mixing later on; it was just a single track that was recorded. That was copied for the CD, and so it sounded great. Of course, recording that way means that if a musician makes a mistake, they could not simply rerecord his individual track; they would all have to play it again.
So, yes, really good sound quality has been possible for a very long time. But they make what sells best, as it is a business. Businesses that ignore the bottom line don't tend to stay in business for very long.