OK...so Sholtz is comparing digital to analog. That which he was hearing in analog to what he then hears after it's become digital. So his reference is the "analog original"...and he feels the that after the digital conversion, there is a loss of "depth".
I guess you can call it "shrinking" if you explain it clearly, but the way I read his comments it's more like he's saying the mix went from a 3-D to 2-D quality...it became "flat". Not sure if he means that it also shrinks the L/R soundstage when he say's "flat".
Well...like I said, my experience with my gear is that I hear the mix open up, get bigger when going from digital to analog.
I don't know how much different that is than what Sholtz says....as I think it's a matter of where you are starting to listen from (either digital then going to analog or analog and then going to digital) that changes the impression of what is heard.
Is the digital making it smaller or the analog making it bigger...?

In my own case, when I dump tracks into the DAW, that's where I do edits/comps and start to pre-mix, and that's where I first start to focus on the mix...so then I go from there back out and mix OTB, that's when I a hear the mic become a bit bigger/3-D.
I guess Sholtz was initially mixing in analog and then going to the digital...so for him it comes across as the digital losing depth and becoming 2-D.
I don't find his comments all that "outlandish" or that there are people simply following "blindly" behind Sholtz.
Go bounce around a few other forums...like I said, you will find top engineers on both sides of the fence, some saying pretty much what Sholtz is saying, though I doubt he's influenced them, rather it's just their personal experience...and likewise there are top engineers who say that digital does nothing to the sound...that it's 100% "transparent".
Like Jay and a few others have said...the gear each person has to work with and to make comparisons with can make all the difference in what they hear and perceive to be better or worse for them.
I'm not extremely stuck in either camp...I find that a hybrid analog/digital/analog approach really works well for me, and I think that for the gear that I have, it allows me to get the most out of both formats.
So Tim...while this can be an interesting discussion, and it's been had across audio forums many times...I was just wondering if you had some specific goal by generating this discussion...or was it just for the sake of some discussion?
I guess what I'm asking is...are you looking to come to some definitive conclusion, some kind of "truth" based on how people reply here?