As I recall, there were some technical limitations of the CAM-D system that kept it from being a contender. I vaguely remember that it was Kahn analog stereo up to a certain frequency (like around 8kHz), then mono digital for the upper frequencies. Since a lot of the stereo image is in the upper band, being summed to mono reduced the stereo imaging quite a bit. Also, the analog part remained subject to audible impulse noise, of course. Possibly, someone more familiar with the system knows if I remembered that correctly.
Anyway, acoustic masking is a perfectly valid method for masking all sorts of stuff, including CAM-D. If done properly in audio processing, it should be possible to chop the heck out of waves and still retain an open sound, however, I'll bet a distortion analyzer goes berserk when subjected to such a signal.