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I’m seeing some debate on Deno’s decision to ensure Node compatibility, apparently as it gives up a core value prop of early Deno to try and hit the reset button.

Can someone help me understand what was lost here? Is there no longer a way to use Deno without using the Node ecosystem?

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It adds complexity. Instead of being forced to do things the Deno way, now users don't migrate at all from node code and then (not unreasonably, due to their mission of node compat) complain when they don't work. A large amount of feature work stalled due to the node compat work for over a year. Even now, in 2.3.0 over 30% of all listed changelog items are node compat. They started pushing you to use config files to better integrate with your dependencies as a new default. etc

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