That question of the sound quality is actually a question of the bandwidth used to encode the transmission. It is naturally easier to access a broader bandwidt

That question of the sound quality is actually a question of the bandwidth used to encode the transmission. It is naturally easier to access a broader bandwidth if the frequency is higher. But there is a point of diminishing returns. You don't get improved audio quality if you use more bandwidth than the original acoustic signal requires. So, yes, AM is not as good as FM... but a THz signal would be no better than an FM signal in transmitting an acoustic signal.