It is not just for PS2 compatibility. Most of the DVD players I have tested here (Sony, Aiwa, Panasonic, Philips, JVC, Apex *pioneer has no probs), can't read much above 4X speeds. It is better internationally that way (incase you also trade). Also standalone VCD players cannot read past 4X well (there are some but not many).
That does suck about the Lite-On burners. The best speed is actually 2X (which none of the newest drives can do) cause most lasers are set at 2X reading speeds. So it isn't about loss of quality, but about player compatibility. If someone trades VCDs with me, I won't take it unless it is 4X or below.