While I understand what you're saying, that distortion will make the contrast between loud and soft greater, I don't think that is likely to result in realistic dynamics.
I have listened to some good SET headphone amps, and they had great microdynamic resolution.
@magon Your comments here describe exactly what I'm talking about, in particular your comment about SETs. This is literally one of the things I have against them! (The other thing about SETs (not so much headphone amps) is they have real problems playing bass, but that's a discussion for another thread.)
Now to understand how this works you have to understand how the ear differentiates sound pressure levels. It does this through the detection of higher ordered harmonics.
This is very easy to demonstrate using simple test equipment:
sine/squarewave generator,
amplifier
a speaker and a VU meter.
You start by connecting the VU meter in such a way (perhaps at the output of the amp) that it can read easily across its entire scale. Then you put a sine wave through the setup, set the gain to read zero VU on the meter (near the top of its scale). Get a good idea of how loud that sounds to you. Then you turn the volume all the way down, cover up the VU meter, switch the generator to square wave and turn up the volume until it sounds as loud as before. Then uncover the VU meter and you'll see what this is all about.
Square waves are composed entirely of higher ordered harmonics.
If you don't understand that the ear uses higher ordered harmonics to sense sound pressure, then what I've been telling you would make no sense.
so with no other explanation available to the engineer, they say that it's "euphonic distortion."
Actually the explanation has been available to the engineer for nearly 100 years (I refer you to the Radiotron Designer's Handbook, 3rd edition, published in the 1930s). Here it is: 'Euphonic distortion' is lower ordered harmonics, the 2nd and 3rd. They are innocuous to the ear in that they are close to the fundamental tone and musically related (the octave above and the 5th above that). So they are unobjectionable and simply contribute to that quality audiophiles refer to as 'warmth' or 'bloom'.