Yes, it looks at the capabilities of the player and downsamples to the
least common denominator.  So, for example, if you had a Touch
synchronised to an SB3 then a 96/24 file would be downsampled to 48/24
since this is the highest bitrate both players can handle, but the same
file sent only to the Touch would be sent at 96/24.  Squeezeplay out of
the box doesn't handle HD files (caveat being there has been some work
done here to make it work), so it would need to downsample for that
particular player.

SOX is the application that is used for bitrate conversion and probably
isn't included in the default package because it's processor-intensive
and could put a strain on your NAS.  You can probably just install it if
your NAS is powerful enough though.


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