This is the result of the different tissues targeted. By hanging you are only stretching and fatiguing ligaments and septum. Not the Corpus spongiosium or any of the erectile tissues. Therefore an erection after hanging will be of perfect quality, perhaps better due to the extra expansion allowed by stretched ligaments and septum.
on the other hand, depending on the type of LM stretches you are compromising erectile tissue in the exercise. When they get fatigued, of course the erection quality will be less while flaccid length will be benefited.
Both are good and have a place in a routine depending on your level of progress. In my case for example after so many years of PE, my Septum is my limit and is not enlarging anymore. If I do exercises that stimulate growth of erectile tissue, I will only be adding more girth and pronunciation the curve, because the septum remains the same length so the tissue has only one way to go. Either grow sideways in girth and/or bend with a curve.