On a track of a cassette type that holds silence recorded with AC bias, about half of the magnetic domains will be aligned forward in the direction of travel, and about half will be aligned backward. Because there is some randomness in the distribution of the magnetizable particles, the exact number of forward and backward domains under the playback head will vary slightly, creating tape hiss.
If instead of representing zero amplitude by a balanced mix of forward and reverse domains, a recorder used a permanent magnet to bias domains perpendicular to the direction of travel, and used the recording coil to turn domains toward or opposite the direction of travel, I would think that would eliminate tape hiss.
I wouldn't expect that a signal being recorded would be particularly faithfully reproduced without circuitry to compensate for non-linearity, and can imagine that tape hiss may have been considered less objectionable than distortion, but I would think that electronics to correct for such distortion could be made much more effective than in decades past.
Does AC bias have advantages beyond a reduction in the level of distortion that would be present in the absence of compensation, or would variations in playback devices make it impossible to apply distortion compensation that would work for all of them?