Yeah, in your words due to the flow of air at higher speeds. I've been thinking through the venturi effect this afternoon and I would think that would act opposite to compression, as in the venturi would create a localized area of low pressure, so would possibly reduce compressibility but would also reduce the dynamic pressure - depending on where a venturi was in the system of course. Interesting discussion point though.
I can't speak to a 737 PFD, but the rationale for using IAS instead of EAS would be that IAS would remain a constant indication throughout all flight regimes while EAS would continually update. Imagine trying to fly where your reference target is always changing.