I noticed that for a guitar which has been split into two effects paths and then recombined with a Morley ABY switch, when I use the "A and B" feature (i.e. - combining both input signals), that the volume definitely drops for one of the paths vs when I use the "A or B" feature (i.e. - passing one of the signals thru alone). What is going on? Is there any possibility of the combining process degrades the quality of the combined signal? Thanks in advance.

Probably phase cancellation .