to improve the sound, you can:
1) change the power supply for a linear model, not a switching one. I bought mine USD13 in Taipei. Or buy the Bolder PS
2) pay nearly as much as a SB for the Bolder analog & digital mods
3)or use an external DAC
4) if you use the variable volume output, make sure that you don't go below 40 (on the 100 scale) otherwise you lose some information in the digital volume adjustment. If like me you connect your SB directly to a power amplifier with too much gain,you may have to use an attenuator (Endler is very good)
5) buy a transporter instead of a SB. I have both, and the transporter analog out is significantly better (D/A section as good as my old Wadia 25).
Wav files don't bring any advantage vs. apple lossless or flac in term of sound quality.
Regarding the different codec, I decided to re-encode all my CDs to flac (using EAC) to replace my backup in apple lossless. While both deliver theoretically the same quality (both are lossless), the problem with apple lossless is that itunes encoding doesn't have the "secure" feature of EAC. With Itunes, in case you have a read error on your discs, you will not be able to know it and the data file will be copied with error. With EAC+FLAC, you have the benefit of the fact that EAC makes multiple reads of the same track and compare the results to make sure there is no read error. Additionally EAC integrates AccurateRip features: by accessing a database, your rip is compared with rips of all other users who ripped the same CD, to make sure there is no mistakes (works for non too esoteric CDs). For the editing of tagging, I personally use Tag&Rename. Very user friendly.
In case your CDs are in perfect conditions, and if you are not paranoid, I believe that you will be just fine with Apple lossless...
Another advantage of FLAC vs. Apple losless is that internally in your SB all files are converted to FLAC before streaming in wifi. If you want to use fast forward, your files have to be encoded in FLAC, otherwise it doesn't work