[Viffermike]

My two cents:

- mp3s are the devil's compression algorithm and, IMHO, the single biggest reason OEM car stereos have become even more crappy than they already tended to be. Do not use unless you have to.
- The degradation issue is a major reason I don't use FLAC. (For the record: I use AIFF since I'm a Mac. Yes, I know there are tradeoffs with that. But it's most practical for my needs now).
- FiiO is an awesome manufacturer; I've met one of the founders. If you really feel a need to add one of its external players, one of those is what I'd choose.
- I'm really surprised that the 2-series HU will read lossless files of any sort. That said, I'm very, very skeptical of the actual analog conversion for playback since the HU and DAC downsamples nearly everything else it outputs -- even, as best my ears can tell, CDs played in the transport. I'd really be interested in hearing someone do an A/B between a lossless file USB and an external lossless DMP such as the FiiO, fed through both/either the analog Aux input and (if applicable, depending on the player) the digital USB input.