I think your question would have been better in place in the M4L forum. But anyway...
Thus, it needs both audio and MIDI inputs and produces audio output. It works fine in the Max 5 environment but I am unable to get it to work in the Max for Live. It seems that Max instruments in Max for Live are only able to accept MIDI inputs.
Its not so much M4L which is causing this "limitation", its Live itself. An audio track doesn't route midi data just like you can't route audio data into a midi track.
What might work however is side-chaining. I know for a fact that this can be done within M4L as I've seen (ok; read about) several patches already which performed this stuff.
To give a better idea what I'm talking about: by default Live starts up with an audio and a midi track. You can't tell the audio track to send its audio to the midi track nor does the midi track allow you to 'pull' the audio data into it.
Now; assign the compressor to the midi track, click the 'arrow button' and turn on side chaining. And presto; the compressor can
"pull in" audio from an audio track and respond to it.
That same approach is doable with M4L. Can't be more specific about this myself since I've never touched this particular subject yet.