Owing to the optical elements in the compressor circuitry, a certain amount of distortion will occur when a lot of compression is applied. This distortion is also dependant on the type of programme material that is being compressed. As an example, heavy tracking compression will not sound too good on an acoutstic piano however a Bass guitar can sound really 'fat' using heavy compression. The hard ratio function was designed to have an audible 'effect' on certain instruments at certain compressor settings.
If you are experiencing unwanted distortion then set the input level so that the 0dB LED is just flashing occasionally on the highest peaks and then apply the minimum amount of compression required to control the peaks. You should be able to do this without using the hard ratio function or the hard knee function and therefore avoid the distortion artefacts whilst at the same time getting the maximum signal level at the outputs