It is rare that a live recording that works. FOLLIES IN CONCERT is one but it was historically important as the first (nearly) complete recording of the show. The live concert of DREAMGIRLS helped fill in the gaps of the OC album of highlights.
Generally what works well "live" doesn't work well for listening at home. Several ALW shows were recorded live and the albums are flat and lifeless. (Then again, it's ALW so the shows are flat and lifeless too.)
You really need the controlled atmosphere of the studio plus a producer who knows how to adapt the piece for records - Thomas Sheppard made a ton of changes fro SUNDAY IN THE PARK and it was a fantastic album, but quite different from the show.
There is a balance to be struck: Fans of the show want the album to sound like a document of what they saw, but others who never saw the show need to be able to understand just from listening to the recording what made the show so electric on stage.
Count me amongst those who feel the RENT cast album could have been better. SPRING AWAKENING also, though I think with SPRING its more a question of the performance style. I don't mind the HAIRSPRAY cast album but agree the film soundtrack has a lot more to recommend it.
THE LIFE and SIDE SHOW (both on Sony) were also poorly produced.
Cast albums are NOT "soundtracks."
Live theatre does not use a "soundtrack." If it did, it wouldn't be live theatre!
I host a weekly one-hour radio program featuring cast album selections as well as songs by cabaret, jazz and theatre artists. The program, FRONT ROW CENTRE is heard Sundays 9 to 10 am and also Saturdays from 8 to 9 am (eastern times) on www.proudfm.com