QUOTE(megabyteme @ Apr 26 2008, 16:14)

... I am picky when it comes to sound quality. ...
You have several options if you want to avoid the very large filesize you get with a lossless codec while accepting pretty large file size.
It's all ideology though and if you ask 5 people you probably get 10 answers with all of them being correct in the one or other sense.
IMO your first choice qualitywise is to use a lossy variant of a lossless codec. Use for instance lossyWAV + FLAC or wavPack lossy. At a bitrate of ~500 kbps you get an extreme quality with a high safety margin. At a bitrate of ~400 kbps you get a quality which usually is overkill too but there may be rare samples where you get at the edge of transparency. At a bitrate of ~300 kbps things usually still are transparent but there will be samples with slight deviations from the original. These deviations usually sound like a tiny amount of added hiss. The choice is yours, with a bitrate around 400 kbps probably being the sweetspot even for perfectionists.
Compare this against the ~900 kbps usually needed by lossless codecs when encoding pop/rock music.
The theoretical advantage of this approach against codecs like mp3 is that you have a simple clean signal path - the technical representation of the music signal doesn't change whereas with mp3 there's a formation of frequency subbands and their transformation from the time domain representation into the frequency domain - and back when decoding.
Nonetheless there's great quality with mp3, vorbis, aac, mpc.
The main advantage of mp3 is its universal usability. Other than that qualitywise you're a little bit better off with the other codecs (in terms of quality/kbps and robust quailty even in extreme musical situations).
The universal usability is a heavy weight though, so it's a good idea to use mp3.
As was said with mp3 you usually get transparent results at a bitrate of roughly 200 kbps (or a bit below - it's a fluid borderline and it's a useless discussion whether Lame -V3 or -V2 or -V1 is the right thing to use). But if you want a security margin for situations the encoder has trouble with, and you don't have to care too much about filesize, it's the right decision IMO to go higher than 200 kbps. With 320 kbps you get the best security margin, but most of the time this is overkill, and the safety margin you get in practice isn't much higher than when you go to something like ~260 kbps on average.
Another question is what encoder to use, and whether you should use CBR, VBR, or ABR in the case of Lame.
At a bitrate like 260 kbps it's an open question whether there has been significant improvement from Lame 3.90.3 until now. My very personal opinion is that at 260 kbps there's no improvement when going up to 3.97 final. Instead there's a certain regression for some musical scenarios which are relevant to me. With current 3.98 developent (we're in a very advanced beta stage) things have changed however and I welcome the 3.98 development very much. As for VBR/CBR/ABR the only thing that counts is quality, and there's no intrinsic advantage for instance towards VBR (many people think like that). In fact even CBR does use a variable audio data bitrate. With 3.90.3 up to 3.97 when it's upto a bitrate like 260 kbps I'd definitely not use VBR as there are samples (relevant to me) that are seriously worse than the corresponding CBR or ABR results, due to an amplification of weaknesses in the psy model. With Lame 3.90 up to 3.97 when using very high bitrate ABR is the best way to go IMO. I once used Lame 3.90.3 a lot and was happy with ABR @ 270 kbps.
With 3.98 things have changed. The decisive weaknesses of VBR have gone, so it's an open question whether ABR is still to be preferred over VBR. In the case of VBR I suggest you use -V0 with your quality demand in mind. -V0 is overkill most of the time, but in difficult situations it's welcome for a perfectionist.
You can also consider using a FhG mp3 encoder. Lame has the better reputation here on HA, and because it's a personal enthusiatic development of nice people like Robert Hegemann and Gabriel Bouvigne (hope 'Bouvigne' is correct), it's a very sympathic thing especially as there's still vital development. But looking at mere quality using FhG with, say, CBR at 256 kbps, is a good thing as well. You have access to an FhG encoder when using for instance Windows Media Player, or if you use dbpowerAmp, or the free command line (surround) encoder available at
all4mp3.
It's not a bad idea playing around with these alternatives, but if you want to avoid that my advice is to use Lame 3.90.3 ABR 270, if only a final version is what you want to use, or if you don't care too much about that, use Lame 3.98b8 ABR 270 or -V0. There's a thread on Lame3.98b8 here (and there are threads on earlier beta versions) so you may want to look there.