I would challenge anyone to go to their local high end hifi store (there are still some out there) and do a comparison of ANY compressed format with the original CD on a high end system and tell me that you can't hear the difference.
I can't hear it. But you can't count with me. I have surgery in both ears and my frequency response is not flat at all - so even the flatest reference monitor might sound like cheap plastic cones to me. You can bet that I save a lot in music equipment.
I still remember similar arguments about digital music at all. Audiophiles (or whatever that means), said that CDs were not as good as analog laserdiscs.
I have a few friends with recording studios. So I just came to an idea for an excellent scientific fair experiment for the kid's school. A double blind experiment. Compare lossy format vs. original WAV format. If at least 1 out of 10 people can differentiate one from the other in 80% of the samples presented, then the format is not good enough. I say 80% of the samples because anything near 50% (60 or 70%) might be just luck. It must be double blind. Experimenter #1 prepares the samples and playsbakc them, while experimenter #2 tabulates the answers from the audiophile evaluators. Experimenter #2 must not know what is being played by experimenter #1 (so he must not hear the music neither). At the end they join and compare results. I would visit Hi-Fi stores and invite self-proclaimed audhiophiles to the test.
For the encoder I would use the lastest LAME MP3 encoder version. The LAME encoder has been fine tuned during the years, and is considered as comparable to most of the newest lossy format (check hydrogenaudio.com). While not necessarily the best, it is almost as good, with a lot more portability than ACC, WMA or Ogg. Obviuosly, I would use a Variable bit rate. CBR is inefficient since during simple passages it uses the same bit rate than during complex ones. For my personal rippings I use -V2, a quality setting that usually averages aroun 192-220kbs, but goes as high as 280kbs if needed or as low as 160kbs. It sounds more than good for my imperfect ears. Actually, it is aligned to what the LAME programmers recommend (standard).