The company needed the help of a senior developer but could not afford a competitive salary, so I offered to take a pay cut along with an extra day off each week. Of course, I was flexible in case my day off needed to be moved around for something important, but that almost never happened.
Thursdays were my off days, and I think this actually boosted my productivity. Aside from what other comments already mentioned about making better use of your time, this setup allowed me to return every Friday recharged and with some fresh perspective and ideas about my current tasks.
The quality of life improvement was great, and my work did not suffer at all. This makes me wonder: if working 32 hours/week can make you more productive than working 40, why the hell do people often put in way more than that?
Sounds like working 80 hours/week would create almost as many problems as it would solve, leaving you with some very questionable "progress". The only way I can imagine doing this is if you do two or three separate jobs, e.g. coding, design and marketing, so you don't get tunnel vision.
I work in a very competitive field, and there are times where I must put in 12- to 16-hour days to ship a project out on time. We get compensation days in lieu of ovetime pay, which has its pros and cons.
On the other hand, I've heard lots of stories like yours, where the project was only possible due to the pure grit of everyone working on it. Most of those stories were in game development, which seems at least twice as chaotic as regular software development.