Do steam-gauge VSIs compensate for altitude?
Yes.  It appears to be the case for &quot;steam gauges&quot;.  At least for a traditional vertical speed indicator.  It's a great question and not one I had considered before.  At first glance, I suspected you may be right, though I don't ever remember actually learning that.
To prove the theory, one pilot apparently took his airplane with a traditional steam gauge altimeter/VSI up to FL220 and found the following:

=&gt;Your altimeter is perfectly accurate at the airport if you enter your barometric pressure correctly.
=&gt;At the cruise altitude of about 8,500 feet or so, your altimeter is off by about FIVE-HUNDRED FEET.
=&gt;At that altitude, it does not matter much that your altimeter is off, because everyone else’s is off by the same amount, and you are far from the airport, and thus landing.
=&gt;The error always seems to be off in the safe direction: You are always HIGHER than you think. Clearly, when they designed the system in 50’s, they designed the altimeters to follow the most conservative lapse-rate we could encounter, so in real-world flying, we are almost-always much HIGHER than we thought, which must be the safest error we can make.
=&gt;The vertical speed indicator perfectly tracks the PRESSURE-based altimeter, not the true altitude, so the vertical speed indicator can be perfectly used to see how much the altimeter will change over time, the ACTUAL climb or descent rate of the plane is actually considerably DIFFERENT… at high altitudes, by 1,290 parts in 24,000, or just OVER FIVE PERCENT.