First: I'm using a music server box supplying digital out to a decent DAC. The lossless files are stored on a networked disk drive.

The lossless files are, for want of a better term, fatigueing compared with the CD played on a transport feeding the same DAC. But if they are "lossless", how could they sound different? The bit steams from the CD transport and the music server should be the same (note that I have gone through all the servers config to make sure there is no EQ or volume adjustment going on, should just be putting the bits straight out).

These are apple lossless files made with iTunes V6/7. I'm sure the encoded files are lossless, and could be used to make new CDs that would be the same as the originals. But does "lossless" guarantee bit-accuracy in streaming playback? What if the box you use for decoding doesn't have much performance? Are there compromises you can make in the decoder that would reduce the computation or memory size needed, but at the expense of introducing artifacts?

I mean, from a marketing/sales point of view, you can claim "plays lossless files" without actually delivering lossless ouptut. So I wonder if what I'm hearing is due to a lightweight decoder.

Has anyone on this forum ever heard of something like this?

What software are you using for playback? I would also recommend playing the CD using the same software and see if you notice a difference.

I think the only thing that could go wrong, in your circumstances, is that you'd get drop-outs with your server if it's seriously underpowered.

Most likely explanation of the difference in your listening experience is your expectation that there will be a difference. Can you arrange a blind test, with someone changing the source without your knowing which it is?

Check if there's no 44.1 -> 48 kHz sample rate conversion introduced in your setup

I hear very noticeable differences all the time when I compare flac / wav / mp3 played on fb2k. Since I do not believe in ABX and everybody tells me it's placebo... then placebo it is!

I came to terms that the placebo-effect is not important to me... it's just there; I hear and accept it.

As someone who has experimented with different lossless codecs over the last few years, and who is just about to encode a large archive of records and tapes to lossless backups (from the wave files, of course the analogue recording process is lossy), I can't see it being anything to worry about as far as a codec 'flaw' you have discovered . Your post needs further details as above, on the following:
.
What does your set-up consist of and what programs do You use?

What settings are used within Your playback program/s?

What is the nature of the playback differences?

I'm fairly comfident it will be something that can be fixed with a bit of knowledge rather than a new lossless codec or version

I agree that more "details" about the whole setup is needed indeed.Like how is your cd player connected to the dac vs the music server? How long cables you run? For me its the opposite:ripped sounds better than cd...

Thanks for the input!

Happy to provide details. It is my hope that the problem can be fixed by tweaking.

DAC: actually it is a CD player with digital inputs so it can play from it's integrated transport as CD player or from a digital source as a DAC. Connected to music server with 1m coax (note I edited this, it used to say "RCA).

Player: closed-box music server (prefer not to say brand in public forum; this is a great product and I don't want anyone to get an impression there could be something wrong with it without any foundation). From what I gather from the web, it is running linux on an SH4 processor. There might also be a TI DSP. Part of my problem in tracking down this issue is that I can't get inside the player. I couldn't change the decoder even if I wanted to. So I'm not hoping to find a better ALAC decoder, I'm just trying to understand what the problem could be.

Source: netgear networked disk drive connected to ethernet part directly on back of music server box

Encoder: iTunes 6/7 (for this testing I have re-ALACed the test files using the latest iTunes)

What does the difference sound like? Here are some observations using Flamenco Sketches on Kind of Blue:
- after the quiet piano intro, the horn comes in fairly loudly; with the CD, it's smooth, with the ALAC it is sharp and piercing (my wife claps her hands over her ears with the ALAC one); hard to be sure, but I think the levels are matched
- when the first horn part gets quiet, on the CD you can hear a sort of burbling or fuzz to it. With ALAC, that fuzz/burble is very muted
- generally I would say the ALACs sound like CD's first sounded when they came out, kind of intense or forward overall

Regarding expectations/placebo/etc.
- I can route Rhapsody through this setup also, and playing the same material via Rhapsody stream is more listenable than the ALAC, although without as much "you-are-there-ness" I won't say it is "better" than the ALACs, but Phapsody is what I most often choose to listen to these days.
- I didn't set out to do a comparison of ALAC with CD; I have been pulled into this because over time I have found the ALACs more and more disquieting to listen to, perhaps I have become sensitized to it and that could contribute to a "get-what-you-expect" error. Believe me, it's it not because I want it to be so, I've coverted all my CDs to ALAC and I never wanted to touch a plastic CD again.
- It's not just me, my wife who has no idea (by her choice) what is playing noticeably cringes with the ALAC files when there are sharp notes on horns or whatever.

Next Steps:
I have acquired a sound card with S/PDIF input. I'm going to see if I can capture and compare the two bitstreams. I've seen some posts on this forum about how to do that, but it might be a while before I can find the time to do it.

RCA out? Do you mean coax with 75 ohm cable? Is there any other way to get digital out of that server? I also think you should get those files on a normal computer and run it out of there into the DAC just to compare using that sound card with S/PDIF. Goodluck!

Jitter from the CD Transport may explain a difference, different cd transports can have individual "jitter signatures" which can make an audible difference.

Can you provide a link to evidence of this? I know people keep talking about this on a theoretical basis, but I have yet to see proof.

You do not have Sound Enhancer or an equaliser setting set when you convert to ALAC in iTunes do you? What happens if you convert the ALAC back to WAV and compare with the CD signal?