Does this degrade sound?

It sounds good to me when I play it

That's all that really matters in the long run.

Do this experiment: unplug the left input, turn the balance all the way to left, turn the volume up and see if you can hear anything from the left channel.

If you don't, there is no "bleed through".

Elizabeth is correct. It depends on the design of the preamp as to how the balance control works.

Blueranger - Elizabeth is right about trusting Nelson Pass. He wouldn't make mistake like that (bleed through) .

Reason for limiting range is gain loss. Imagine that you have 100% balance adjustment. It means that each channel goes from 0-100% and therefore in center position it has 50% of loudness. Half of the loudness means about 30% of the signal. Full 0-100% balance adjustment would require additional gain of 3 in the circuit. Why to adjust whole range when it is not needed while smaller range gives more accurate adjustment and doesn't attenuate signal so much.