Yes, as I said above, most people keep the AC in recirculate mode. And that is the culprit here. Recirculate mode keeps using the air inside (by recirculating the stale air) again and again. In the closed confines of a stationary car with multiple people breathing this is a definite recipe for disaster as the oxygen keeps getting lower and lower. On the other hand the Fresh Air mode sucks in the fresh air from outside thus rejuvenating the oxygen level inside.
So why do we keep the AC in recirculate mode? Firstly, it is better to be set so when you are passing through a dusty neighborhood (most of India, basically). Also, many say that fresh air mode causes a little more strain to your AC (linked to FE) and hence the fixation.
And no... fresh air mode will not suck in any harmful gases from the engine bay... unless of course you have a big time khatara with leaky plumbing, spewing gases from everywhere
Basically, there are no "gases" as such coming out in your engine bay in the first place.