I have been listening to quite a bit of music with the SQB3. 

I tested:

(1) Original CD on Accuphase DP65v
(2) SQB3 connected via Kimber Optical to DP65v's DA
(2a) Uncompressed
(2b) 256kbps MP3

(1) Always loved the sound. Crisp, high resolution, yet extremely
musical.

(2b) In the vast majority of instances, equally stunning sound. But
upon listening closely to "My world is empty" on a Kevin Mahogany
album, I finally saw some warmth and a certain acoustic echo missing on
the bassline. The slightest difference, but detectable.

(2a) Same as 1, impossible to tell a difference. 

I am sticking to my strategy of compressing MP3s at 256k CBR. The
quality loss is damn near undetectable, the sound great, the
convenience unbeatable.


-- 
pablolie
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