v26.0.1 brought back a functional "compact tab" layout. But it seems to have some bug still.
With a couple of tabs open and Safari running for some time, switching between tabs become sluggish. There is about 2-3 seconds delay.
If I switch to "separate tab" layout, the delay disappears. When switch back to "compact tab" layout, the delay comes back and persists until relaunch of Safari.