So weather its a good or lousy recording it doesn't matter which one transports it to the receiver, it is what is?
Either dynamic compression or LFC are both systems which compromise sound quality in order to accommodate a specific situation. I can't think of how either could help a bad recording if you are listening in a typical home audio situation.
Audyssey Dynamic Volume is a Dynamic Compression system. It makes the quiet stuff louder and the loud stuff quieter. For example if you are listening to a classical piece (which often go from very quiet to very loud) while your neighbor is blowing leaves, you would manually crank it up on a quiet passage then get blown out of your room when it got loud (so you would need to turn it back down). This also might be useful if your kid is asleep and you want to watch The Avengers. By reducing the loudest sounds you are less likely to disturb the kids sleep when Hulk is punching spaceships or Thor is conjuring lightening!
LFC is a way of turning down the lower frequencies. It stands for Low Frequency Containment which is a less offensive way of saying "subwoofer castration". The objective (per their terminology) is to keep low frequencies contained in your room or apartment. It is a handy way of applying a low frequency roll off so the deep bass most likely to be a nuisance to the neighbors is selectively reduced. This is an even better thing for the kid asleep scenario.
I forget the name, but the more recent Denon and Marantz AVR's have a Dynamic Expansion feature which I find worthwhile. It has been awhile so all I can say is after playing with it, I set it at one of the lower levels and forgot it. It is intended to add dynamics which are often compressed depending on the recording. For example a recording engineer might compress the dynamics because he is aware the typical listener is going to to be listening to earbuds while riding the subway (similar situation to leaf blower). Or more likely, since louder music always sounds better the engineer might want to get the average volume as high as possible so their song will be more likely noticed and liked when played on the radio. To get the average volume up, you have to reduce the dynamic range so the loudest does not exceed the capabilities of the medium. You have likely experienced this if you have any CD's from the 80's vs modern CDs. Almost universally, I find the old CDs are not as loud as new ones. The old ones have the volume level centered between the highest peak and the lowest level a CD could contain. The new ones are compressed and then the loudest peak is raised to near the maximum volume the CD can have.
Dynamic EQ is essentially a modern sophisticated "Loudness control". Back in the day, Loudness switches were developed to counteract the loudness contour curve associated with human hearing; however, manufacturers quickly found out their gear sold best if the loudness switch provided extreme amounts of additional bass and treble (which had been very hard/expensive to obtain in the previous decade) because that is often how a buyer would evaluate a receiver/amp! Thus a good idea ultimate became a crappy execution and over time the loudness switch got a bad reputation (except Yamaha's loudness knob) and was eliminated from audio controls.
I like DEQ (with a -10dB reference), but it is easy enough to play with and see how/if it works for you. If you always listen loud, it does nothing, but when you listen with the volume down it sounds quite a bit fuller.
HTH!
