Exactly. Most buyers are not that savvy and are buying on first impressions much more than on cold, hard calculus.
If the siding looks terrible, it breaks their fantasy of what it would be like to live in this particular house. Nevermind that logically they might be better off replacing the siding and picking the paint color themselves, it doesn't matter, the spell is broken.
Now, for items discovered during the inspection, watchmaker's logic holds, because they've already been able to imagine themselves in the house enough to make an offer. Now, as a buyer, I'd much rather get a cash credit and do the repairs myself, ensuring they are done to my preferences and satisfaction and any warranty applies to me.