Have you tried the Squeezebox forums?
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FLAC is a lossless compressed format. SB uses FLAC by default I believe to stream higher res files for better bandwidth over the network, in particular WiFI networks that can become a bottleneck for transmitting data fast enough if uncompressed high res data streams were used. SB system is prone to fewer dropouts while playing as a result of limited network bandwidth. SOund quality does not suffer because lossless compression is used in FLAC.
Thanks for the info guys. I guess I should have checked other sources before asking here; but, I tend to consider the information that I get here to be more reliable than information that I get elsewhere.
Anyway, this is what I discovered, for those that may be interested.
First, the SBT does natively support AIFF files. The problem is that there is a bug in the software that prevents the SBT from decoding (if that's the proper word) AIFF files of greater than 16 bits and/or 48khz. I verified this using a 16/48 file with only the AIFF stream enabled. The 16/48 file played fine, but the 24/96 file only gave me static.
Second, (from what I read) you must enable the Flac stream under AIFF file types to get the 24/96 and greater AIFF files to play. They will play but a down conversion to 48khz occurs. Although I was able to verify that enabling the Flac stream works, I wasn't able to verify the down conversion part. I am, however able to hear the difference between playing a 24/96 flac file vs a 24/96 AIFF file. The 24/96 flac file has a more full bodied sound. Perhaps the down conversion thing is true or, of course, I'm fooling myself.
Third, and a offshoot of the above, is that the SBT does indeed fully support flac in native format. I converted some of my hi rez AIFF files to uncompressed flac and noticed an immediate improvement when doing an A/B comparison.
I don't think that this is so much of an example of flac being better than AIFF, but more of a work around to a limitation of the SBT.
I think that you guys lead me to my answer. Thanks.