In the book, "The Devil's Horn", the author recounts a discussion he had with Ralph Morgan on the subject of square chambers. Ralph stated that a smaller, square chamber helped the projection for players in dance bands, and gained popularity in the 1930's. However, it was his opinion that the square chamber sacrificed intonation. No reasons were presented in the text for stated intonation issues. It is just stated as an opinion. For anyone who has the book, this discussion occurs in chapter 8.
Edit: I just noticed that there are a few older threads in the SOTW archives that look like they are related to this topic.