Hi dm,
And welcome to the Axiom forum. All the answers by everyone are helpful, and generally speaking, the digital-to-analog converters used in current CD and DVD players as well as AV receivers are a mature technology and will essentially sound identical, no matter what the player's retail price.
To address your MP3 question, if we're speaking of high fidelity, then to avoid any audible anomalies with MP3, you have to use a data rate of 320 kb/second. I say this not as a matter of opinion, but as a proven scientific fact, as I was part of an international listening study of various codecs and data rates from around the world (Canada, the UK and Australia). The purpose was to select the most audibly transparent codec for distribution (terrestrial, satellite, and studio-to-studio) of music of broadcasting and recording sources.
Without going into tedious detail, the above data rate (320 kbs) was rated "essentially transparent". What does that mean? Using a variety of jazz, classical, rock and a cappella recordings, it was the data rate at which no audio anomalies could be consistently detected when compared with the full data rate source. I'd point out that generally, rock recordings were not as critical listening material, although one of the surprises was an a cappella solo female vocal that became slightly harsh and sibilant at rates slower than 320 kbs. Some other instruments also revealed problems with some of the codecs (castinets, for one).
In the example you cite, it may well have been a lousy recording. Keep in mind that recordings of all stripes, whether on vinyl, CD, DVD-A, SACD, DVD or analog tape, can vary dramatically in sound quality. There are thousands of terrible recordings on every medium, and lots of good ones. But certainly a good hi-fi system and great speakers will reveal the poor recordings and will enhance the great ones.
Regards,
Alan
