Larz,
Yes, peat moss can loosen up clay—temporarily. To really get clay to loosen up, try to get soil biota working. This is everything from bacteria and fungi to earthworms. Without the soil biota, the soil will compact back down to something as hard as bricks.
Speaking from
experience, for years I kept collecting shredded leaves and tilling them into the soil—to no avail. And I mean I collected HUGE amounts of leaves—3-4 4x8’ trailer loads packed 2.5-3’ tall. All this was put into two beds measuring about 6x12’. I did this for years yet the soil never loosened appreciably.
Turns out that I was scaring off worms and damaging important fungi strands in the process of tilling. Eventually I discovered
wood chips, just piled them on the top of the bed and never looked back. After just 1winter it was already hard to tell where the chips stopped and the soil began.
Even better, I introduced some aggressive fungi to the chips and the resulting bedding is the best I have ever had. Again, speaking from experience, getting biology in the soil counts for virtually everything!
So yes, peatmoss can help, but I strongly suggest piling matter on the surface and letting biology take over.
Good luck!
Eric