This has been known forever. Stream-based packet tunneling absolutely does outperform packet wrapping in good network conditions, for the simple reason that small packets can be combined by the transport layer and avoid the overhead.

The problem is that in the presence of any packet loss at all, every packet lost causes a stall of the whole tunnel until it gets retransmitted, which even in the best case recovery conditions requires two (three? I forget my SACK details) round trips. If one side is using traditional TCP retransmit timers it can be much, much longer.