I always just figured the moss became more tightly packed when new root growth compressed the sphagnum. I also figured that roots growing into sphagnum were adapted for that medium and that growers allow the sphagnum to dry between waterings; that the water retentive nature of sphagnum was financially beneficial to growers. The biggest root rot issue I see with sphagnum is when there is a original sphagnum core that was never removed and filled in with bark or less water retentive medium. In this case the core never dries out and rots the roots at the base of the plant.
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