... the AAC has been re-converted to WAV: a necessary practicality to keep the test blind, ... However, this has leveled the difference somewhat ... the upsampled-to-WAV AAC will perform better than the AAC left in its compressed form.
I don't think you understand what is occurring here. - compression, lossy or lossless, has nothing at all to do with up-sampling, down-sampling, or re-sampling.
There is no reason why the bit-resolution and sampling rate cannot remain constant throughout all the examples.
... real-time decompression during playback results in audible degradation.
Oh no it doesn't.
Audio is an undemanding task for computers. They can easily uncompress video on-the-fly for example, which is far more demanding, and still have lots of redundant cpu power in hand.
JC