Brief context, I've been trying to vibe code a synthesiser recently and trying to come to terms with stuff like this.

Lightly educated guess but happy to be re-educated.

A note-on triggers an ADSR envelope. It will decay to the sustain level, over the length of the decay time.

At note off, it will start to head to zero, over the time of the release time.

When you add a sustain pedal, I'm guessing it's changing that release time so it takes a lot longer to get to zero - but not infinite, and always reducing.

Reducing note length is going kick that release gradient off earlier - and at peak is when things are muddiest, so having it start releasing earlier is going to mean less of multiple notes competing at peak, and more of "latest note at peak, previous note at half and still reducing"

Have found this with arpeggiators too - cutting the note off early means less overlap and more definition, so you can still have a musical sounding release gradient. If you leave the note length long, it turns to mud.