[p1esk]

there's no fundamental reason algorithmic composition systems could not include modulation parameters of all kinds (pitch/breath/effects/synthesizer controls/etc) in their output

There is such a reason - lack of training data. Very few high quality detailed MIDI samples exist to train machine learning models like AudioLM.

For state of the art in MIDI generation, take a look at what https://aiva.ai/ produces (it's free for personal use). There you can compare raw MIDI output to an automatically generated mp3 output (using "VST's and samplers with routing and effects in place, then using some combination of genetic algorithms and other methods to "tweak the knobs" in the search for something pleasing.")

mp3 version will sound much better than raw MIDI, but (usually) significantly worse than music recorded in a studio and arranged/processed by a human.