Here we go again :) There is no question that lossless formats such as flac produce bit perfect copies. Just the as the argument that all CD transports produce bit perfect digital outputs. The issue is playing that back - it may be bit perfect but it has to be converted to sound at some point. I'm no expert on the internals of a squeezebox, but the theory is that the extra processing of a lossless compressed format (over a wav) could possibly produce more jitter. In practice I doubt you will find anyone that could reliably tell the difference.
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