I hunted with 22 rimfires for decades, and can assure you with literally 100's of squirrels taken, a high velocity 22 is a very POOR choice for squirrel ammo!
And you hit the nail on the head, velocity, and to heavy of bullets, creating to much overpenetration, to transfer quality energy to the game is why! Decades ago, when I learned to use standard velocity ammo, I seen a dramatic differance in how the impact of the shot, made a big differance in knocking them off the tree.
I later learned a better choice, and that was hollow pointing my standard velocity ammo! This really made an even bigger differance! Using hp high velocity ammo, did not work as good as solid point standard velocity.
Ya I penetrate them with everything, even the little 8.6 grain 177 pellets, but they still transfer more energy to squirrel, and the faster you blow thru them, the less energy is transfered, and the more is lost out the other side!
I've had pcp's, and for me, they are more baggage than they are worth! I own 5 Wiehrauch springers and 3 Diana's, and would not trade any one of them for a pcp, thinking it would work better to kill rabbits or squirrel. NOW, if I was hunting ground hogs, raccoon, possum or larger game, hell yes a pcp can be an advantage for power and penetrate heavier bone and deliver needed energy that's not needed for the smaller thinner skinned game.
But make no mistake, before I went to the expence and trouble of manufacturing air for a rifle, and fussing with bottles, tanks, compressors, filters, driers, and the maintenance needs of a pcp, I'd just grab a box of my own 22 standard ammon that I personally size and HP myself, or for bigger game, hi velocity 22 solids.
I don't need a pellet gun to replace the better 22 rimfires I already own. I have pellet rifles because they are better suited to the power range and accuracy, the lower powered rimfires can't produce.
Cb's and shorts, slowed down to under 18fpe, are severe lobbers with their heavier than needed bullets, not as quiet.
But make no mistake about your over penetration comment, you are dead on! It is less desirable, as well as very well proven over 5 decades.