It would be nice if AM was noise free like FM, but so far HD Radio has proven an ineffective way of doing it. It doesn't deal with the noise, it only covers it up by using digital so you don't notice the noise. But then the cliff effect causes you to go from a good sounding signal to nothing. There really is no way to deal with the noise on the mediumwave band by modern electronics other than targeting the source. HD should deal with short bursts of noise using its buffer, but has so far proven ineffective against that. Look at videos on youtube of lightning discharge taking out an AM HD signal close to its tower.
The sound quality absolutely blows away satellite radio which I also have in my car.
Well thats not hard to do, satellite radio sounds compressed more than HD radio, especially if the station is running 2 or 1 HD channels. I can't see myself ever paying for that low quality audio they call satellite radio.
HD terrestrial radio sounds even better than a CD
Something is wrong with your CD player or CDs then. One of the things that stands out the most for me in any low bit rate lossy digital audio compression method (HD Radio, mp3s, etc) is that percussion instruments sound artificial or weak. On CDs they sound quite a bit more realistic, not sure if its the higher sampling rate or better bit rate.
HD on FM will likely out survive HD on AM. It will stick around as a way to feed translators and also in densely populated areas as a way to serve minorities, missing formats and AM simulcasts. For those big rural FM stations that get out 70-100 miles, HD will never be able to serve the same are that analog can.