ZDoom

Just checking this, you are right. The current sound backend never checks this CVAR. From the looks of it this got changed when ZDoom migrated from FMod 3.7 to FModEx 4.x, which was 14 years ago. Back then the entire sound mixing model was changed.
I'm sorry, but I do not see a good way to re-enable this option with the current sound mixing model so I'm just going to remove the option from the menu.

What says in the title. I'm trying to make a map that works a lot like vanilla, and for the most part, most MAPINFO-set compatflags work fine. However, compat_soundcutoff does not work whatsoever.

I attached a file that includes a MAPINFO lump that sets some compatflags for both E1M1 and MAP01 so anyone can test this. Load this and open either E1M1 or MAP01 in any IWAD, type ID(K)FA cheat, and fire a rocket. The explosion sound will play fully, even though the actor has ceased to exist long ago. This happens in both GZDoom v4.3.3 and LZDoom v3.85, but also happens in the most recent development versions.