You can get good deals on Garmin watches that play music at their factory outlet store. I compress music with AAC Pro on my mac and then upload it, I really can't complain about the sound quality given that the gym or outdoors is usually noisy.

Garmin really undersells their music functionality on their fitness watches. I wasn't expecting the depth of music features on their newer stuff, like being able to automatically sync Spotify playlists to your watch for offline play, or being able to use the watch as a remote for your Bluetooth-connected phone.

As you said, losing spatial awareness is only an issue if you are forced to share space with cars where drivers often don't pay attention and try to murder you. If you are on paths/trails or in the middle of nowhere then its not a big deal. You don't hear the mountain lion stalking you regardless if you are listening to music.

Awareness is important without cars too. Be it cyclist to cyclist or runner to cyclist.

You may not hear mountain lion, but you may hear stray dog.

That latter part is important. I live out in the country, and I've had more than a couple of encounters with aggressive dogs. Occasionally other wildlife, but as I like to posit: The forest reveals its secrets if you listen closely enough.

It’s not just cars, helps to just hear what else is happening, if other runners are behind you, cyclists, etc.