AGC is not compression, is a negative feedback loop that reduces gain to maintain a relatively stable output level. If you try to tune on a faint station near strong ones, the stronger carrier pumps the gain down, making tuning difficult. if you cut AGC the gain goes full up. You can cut AGC and reduce gain, but then you'll lack amplification to hear the weak stations.
If manual AGC and volume should be different controls depends on gain distribution across stages in the receiver. In superheterodyne AM receivers, most designs will need both to get best performance.