"Is there something about the actual media that put a hard limit on how tightly information could be packed on it that couldn't be solved with a better drive?"

"Is there something about the actual media that put a hard limit on how tightly information could be packed on it that couldn't be solved with a better drive?" For floppies: Yes. It wouldn't help to use better precision. The medium itself can't handle that kind of density. 3.5" floppy drives actually went over the limit with 1.44MB ones - they fail when kept in storage for some years. Much much more than 720KB floppies.