How come the guitar sounds great on purchased Rocksmith songs but horrible on user downloads ? I tried about a dozen and they all sound like shit. I tried to get a good sound by going to the tone settings but not much better.

because of effort and knowledge.

How come the guitar sounds great on purchased Rocksmith songs

 

Because you don't have 'Cowboys from Hell'.

Some CDLCs are better done than others but the problem really lies in the game itself not having a more nuanced set of mixing options.