Time Machine backup size seems to be too small It is my understanding that Time Machine does not compress as it backs up and that it backs up everything (at least in default mode). 

Why then is the space-used stat given by Finder re my external hard drive to which I backed up my iMac's (OS X 10.9.5) internal drive much lower/less than the same stat in re my internal drive from which I backed up. The difference is 354.39 GB on internal vs. 85.83 GB on external.

My first backup took only about 40 minutes, which surprises me - thought would be like 4 hours, so I am wondering if it was complete and successful.  However, all the files on my internal do seem to be on the external, and I got not messages indicating that there was a problem. It has been backing up hourly since that initial backup without any problems apparently.  

Shouldn't those stats be the same?
Time-machine does not back up your entire Harddrive. It excludes most of the OS files and backups to your internal harddrive.
It is possible, that you didn't notice, that your data got accidentially backed up to your internal drive. You can check it as follows.

To see how much space those local Time Machine backups are consuming, click the Apple icon on the menu bar, click About This Mac, and click the Storage heading. The “Backups” category here represents your local snapshots.

You can disable that through the terminal:
sudo tmutil disablelocal

Edit: It will then automatically purge the already created local backups