Keith, I have a background in these materials. You are right in how the fibers are compressed, however, when they are laid out in the mat that gets compressed they are predominantly horizontal. They are "air laid". The fibers are made much the same way paper fibers are made, in something called a refiner or defibrator that "disassembles" the wood into its constituent fibers. A binder (a version of CA glue called MDI or sometimes phenol formaldehyde) is then spray applied at something around 2-3% by weight to the fibers as they move through an air stream. The fibers then air laid into a fluffy mat that gets compressed in huge hot presses to make the board. When the fibers are laid into the mat that are almost all horizontally oriented. Preferentially, fine fibers are laid into the faces for a smooth finish, and coarser fibers are used in the core. If the fibers were just tumbled up and compressed, you would be right about the expansion, but they are not, and the process gives a very definite bias to the fibers being all horizontal. Just look at the edge of a MDF board and you'll see what I mean.