Earlier quoted context omitted.
The engine itself isn’t gutted - it’s full of functionality that was never lost. MS just (correctly) reasoned that transparency effects in the UI - introduced in Vista simply to show-off the capabilities of the DWM compositor - ultimately detract from a good UI.
From what I remember it lost the ability to render rounded window corners, because while Windows 8 msstyle themes existed they all had the hideous boxed corners that clashed hard with many looks. I don’t agree that transparency is always a detractor. Judicious use can be a net positive, but it doesn’t work for all themes and there should be an option to turn it off. Personally I didn’t find the W7 variation of Aero t…
...I'm guessing you haven't used Windows 11?
--------
By "rounded corners" are you referring to rounded-off corners in the nonclient area (such that the hWnd's rect is not clipped at all)? If so, then no: those would be rendered using a 9-grid[1] and have always been supported.
If you're referring to how so many fan/community-made msstyles for Windows 10 retain the sharp corners, I understand that's not a limitation of DWM or msstyles, just more that you need to do a lot of legwork when defining nontrivial corners in an msstyles theme; it can be done (there are plenty of examples online, e.g. look for Windows XP's style ported to Windows 10), it's just that most people don't go that far.
-----
[1] In msstyles, the 9-grid defines how a rectangular bitmap is stretched/scaled/tiled to fill a larger area; it's very similar to how CSS image borders are defined with `border-image-slice`.