I think action affects tone in much the same way that string gauge does -- and presumably for the same reasons. And as Laurent (who knows much more about this than I do) points out, too much of either saddle height or string tension can do harm and/or muffle tone. The third factor is string attack. On guitars I fingerpick, I find that when I lower the action some, I tend to pick harder to get the tone and volume I'm accustomed to hearing. I usually back off some after a while, though.
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Bob DeVellis
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