The liquid form is already more dense than the highest gas pressure. The expansion of liquid into hot gas is greater than starting with gas under any pressure.
which would result in a much more powerful ignition
The same number of molecules only expand so much during the combustion. If the combustion is complete, the expansion does not get any greater. If the initial condition is more dense, such as cooler, starting first with a liquid, the ratio of expansion is greater delivering more power per rotation cycle.
By the way, water does not compress but some other liquids do.
http://www.insidersecretstohydraulics.com/hydraulic-decompression.html
I would like to see the theory tested out in a lab.
Certainly the molecular density of the liquid will be vastly greater than a gas, but I wonder if the energy absorbed by the state change doesn’t offset that.
I also wonder if compressing the vapor would simply cause it to liquefy again.