I have Adaptive Volume on and Volume Leveling Off and Audio Path is reporting that peak level normalise (Fixed) is adjusting volume by -5.0dB so that's not "as loud as it can" in my book.
It will play as loud as it can
without clipping.
The track that you are playing must be a highly compressed lossy track. The lower the bitrate, the lower the volume level playback typically has to be to avoid inter-sample clipping.
Check the Peak Level R128 tag for that track (or album) and it will be around +4dB.
There is an additional -1dB reduction on playback because the analysis is not perfect.
In my opinion, enabling both Volume Leveling and Adaptive Volume (in Peak Level Normalize mode) provides the "best quality".
This provides a good listening experience in a "do no harm" kind of way. It levels the volume of playback so that you don't have wild swings in apparent loudness as you play different content. And, it boosts the volume of playback to compensate for the volume reduction this causes, but does so in a way that preserves intra-track dynamic range on an album (or an entire playlist).
If you don't mind adjusting your volume when you make a change to the playlist, this is fine.
Every time you add or remove an album, it can shift the whole playback level up or down. (or it might not affect it)
If you use Volume Leveling alone, it uses a fixed playback level instead of a variable one.
Volume Leveling on its own means that you set the volume as a preference.
Volume Leveling + Adaptive Volume means that you have to adjust the volume in response to what is being played.
It's still far better than just playing albums without any leveling at all though which can be a lot more variable.
If you just set up a playlist and go, without making changes to it, then you might not see the difference, because everything within that playlist is still being leveled.
Matt explains:
It considers the entire Playing Now list, not individual tracks. I also don't think Matt ever said it goes absolutely right to the edge. You can search his posts if you want, but it probably has some conservative "fudge factor" built in.
I did some testing.
Peak-level normalization still behaves on a dynamic track/album basis like volume leveling does.
So if you play an album, it is based on the loudest track in that album. (on an album where tracks are +0.2dB and -7.0dB, the whole album plays at -0.8dB)
If you play random tracks, it operates on a per-track basis. (when mixed with tracks from different albums, the -7.0dB track plays at +6.0dB)
It only treats the playlist as a whole if you have Volume Leveling enabled at the same time.
This is the way it should be. It's a very smart system.
The only thing I can think that it's missing is a way to tag an album that forces it to use per-track leveling/normalization for those rare albums (usually compilations) where that would be better.