To my mind it’s all about the murk. I think Lanois did a great job on the original Time Out of Mind. The dark sound was a huge part of its allure. It’s a work of art (no?) about aging and losing touch. About existential darkness creeping in as you get closer to some reckoning. Things are getting more obscure, not brighter as the singer might have expected. So he’s constantly looking backward in regret or forwards in resignation.
Lanois caught that feeling in the production values. Not an easy thing to do. Did he go overboard? Perhaps. But this was in the nineties and it was a contemporary sound. And let’s not forget that Dylan has a long history of gainsaying his own work. I’m sure he was very much in the driver’s seat, though maybe not perfectly pleased with the result. To my mind, the anti-audiophile values of the production (and really, they’re not THAT bad) are gorgeous and had everything to do with making it one of the more moving albums I can remember hearing. Critics are always gonna huff and puff about Bob Dylan - isn’t that, like, one of the great lessons of cultural criticism since the 60’s? (lol). That just means (to me) that he’s doing his job.
As an aside, I saw Dylan perform this material in 1998 in a small club in Chicago. One of the better concerts I’ve seen, definitely the best iteration of Dylan live. It’s a quarter of a century ago now, so my memory may be off. But I remember Dylan using two vocal mics, I guess to mimic the sound of the album. Ditto the band - lots of reverb. So the ‘actual sound’ of the live band wasn’t exactly like the CD but neither was it as clean and up-front as it is on the new ‘bootleg’ version.