Huh. I thought it was thought of negatively because people confuse the word ego (self) with egotism/conceit (exaggerated sense of self-importance).
The same sadly has happened with confusion of the word selfless (having no concern with self) with unselfish (concerned with others before oneself) and altruistic (unselfish concern for others' well being).
Personally, I don't see any incompatibility between having a sense of self and healthy self-esteem and having compassion.
Indeed, I see a major incompatibility between actual selflessness and universal compassion - as selflessness would preclude compassion for oneself.
Selflessness merely means understanding that selfless service to others' happiness is a fundamental element of the spiritual path. We do not have to love them more than ourself, just equal, but we must take the chances we get to serve their happiness as much as possible.
You're right about the negativity of the ego's self-important nature via conceit and egotism. Those are negative traits of the self. The goal of self-improvement is to become a consciously virtuous person who puts the needs of the whole in its proper place, and doesn't indulge their selfish vices, which always cause unhappiness to those around them.
Positive self-esteem, when due to being a compassionate person, is a necessary component of the self-evolving person, because honesty in grokking the truth of ourselves is an important part of our growth.
And, remember, universal compassion also includes being compassionate to our own self, and as we increase our virtuosness, we are ever more beloved by the universe, itself. The happiness on that path is not known by but a small minority of the world's cultures/societies.
Sorry I'm not writing so clearly this late in the day, but know that the ego we have a birth is mostly selfish. It takes a definite turn towards the light to begin the process of purifying it by degrees from egotist to self-actualized bearer of compassion. It's a true fight, fighting against our own fallabilities and weaknesses and selfishnesses. But it's the most worthy struggle we will ever undertake.
The same sadly has happened with confusion of the word selfless (having no concern with self) with unselfish (concerned with others before oneself) and altruistic (unselfish concern for others' well being).
Personally, I don't see any incompatibility between having a sense of self and healthy self-esteem and having compassion.
Indeed, I see a major incompatibility between actual selflessness and universal compassion - as selflessness would preclude compassion for oneself.