Oh shrinking? I doubt that

I believe we used the below product on the sub-floor to seal it.
White Pigmented Shellac Primer
http://www.sherwin-williams.com/pro/sherwin_williams_paint/sherwin_williams_paints/primers/interior/

By 'compression' I was just referring to the length of the board, hence the gaps. Those gap changes are noticeable throughout the year.

Here's a short chronological timeline...

Jan 2007, we close on new house, dining room has wood floor, living room has carpet.
May 2008, we get wood floor installed in living room and hall. New floor shows cupping.

The day after the install my wife has a baby and complications, badda boom badda bing here we are a year and a half later.

We had a competitor come and give us a quote for a floor in the basement and asked him about sanding and re-finishing the wood floor. He said he didn't think sanding would fix it unless they went down pretty deep and it would be expensive.

If there was any testing of the substrate or wood before the install I am not aware of it.

OK, First off, why did you feel/believe you needed to "seal" the subfloor? Had the carpet been getting steam cleaned often? The shellac primer is not any kind of a moisture barrier/sealer. It does work well for blocking stains, smoke damage and odors. Did the subfloor ( wood ? ) shows signs of water/urine damage? Generally, wood subfloors dry out fairly quickly if they have gotten wet. The shellac primer MAY have delayed the drying process IF the subfloor was wet/damp. Also, you say the new install shows cupping immediately after installation, yet, you do not deal with it until 1.5 yrs. later? I understand other, more important priorities with the family. That's quite understandable. But a short phone call to the flooring installer/contractor cannot have been that difficult to manage. Be that as it may, it is possible the installer will come out and give you their explanation for why the floor is cupped. They should check the various flooring components to look for elevated moisture. Whether they assume any responsibility is up to them. I would not automatically do that myself if a customer contacted me a year and one half later. Furthermore, if I have tested an install site and it tests fine at the time, then year/s later, the floor cups, it has to be from a factor that did not exist at the time of installation. In that case, I am not responsible. I would suspect that your contractor will take this approach as well.

As far as what to do, probably full replacement is your best course of action. But first, the cause of the cupping needs to be determined.

The 'sealer' was to protect from urine odor. It was all dry prior to the install, although no official moister readings were taken/recorded.

I think the 1.5 year wait will make it hard for us. Shame on us for waiting.

Thanks all for your opinions. They have been helpful and insightful.