Hash or compression function in Merkle tree nodes? Wikipedia says about a Merkle tree:


  Nodes further up in the tree are the hashes of their respective children. Usually, a cryptographic hash function such as SHA-2 or SHA-3 is used for the hashing.


A cryptographic hash function can be defined using a 1-way compression function. Can we use a 1-way compression function for hashing children? It seems more efficient. We don't do length padding. For every node there is 1 less computation of a compression function.

In Merkle hash torrent extension of BitTorrent and in TTH (Russian version describing Tiger Tree Hashing) they use hash functions, not compression functions. I did not find data on AICH of eMule. What about other tree hash functions (I don't know such; maybe, you know)?
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)