I am guessing it can be a combination of both.
For those who end up with misalignments of bones or joints after, a truly complete recovery will be impossible without further surgery.
Additionally, no doubt excessive/aggressive stretching forces during lengthening can cause damage to muscles/tendons/ligaments leading to microscopic scarring/fibrosis that impairs function.
I think the best solution for the first issue is to make sure your surgery is well planned and executed. Dr. Monegal has sent me an article by Dr. Baumgart from 2009 on what Dr. Baumgart calls the "Reverse Planning Method" for leg lengthening. It is intended to minimize misalignments post operatively and maintain the axis, regardless of method used. If a surgeon uses this method, sticks to it, and executes it properly, there seems to be no reason to ever have misalignment or varus/valgus after surgery. I will attempt to summarize its key tenants on this board in another post when I have the time.
Regarding the second issue, I think the solution is pre-stretching and maximizing pre-operative flexibility. Flexibility takes months to years to get. It might take an average guy months to years to be able to do the splits for example. However, during leg lengthening, you are stretching the soft tissues just as much but within the span of one to two months. People pop tramadol to mask the pain (as one must) but the reality is the tissues are tearing on a microscopic level. I think theoretically if you are able to maximize your flexibility before hand, the stretching/tearing forces during lengthening can be minimized.