Hash or compression function in Merkle tree nodes?
In a Merkle Tree, data is eventually and inevitably lost, because it is compressed away. If a Merkle Tree used a non-padded compression function, the size of the resulting hashes would go down level by level, resulting in a top hash that is very short. The shorter that top hash is, the less it CAN say about the contents of its tree. The longer the resulting hashes in a Merkle Tree are, the more unique the tree is, and the better it expresses its data. In addition, if the results of the compression functions are not standard (i.e. dependent on tree level), than it is very hard from a developer perspective to create software that can work for any and all sizes of Merkle Tree. In short, a non-padded compression function would destroy the "uniqueness" of a tree, and be harder from a developer perspective (keeping the top hash of a long enough size to preserve data)