Read the iTunes FAQ...
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When you move music from your PC into the iTunes Library, the quality of the sound can be affected. To maximize sound quality, change the Importing Setting to match the Bit Rate of the file you are importing. For better audio quality, the higher the Mono or Stereo kilobits per second (kbps) and the larger the file size. To change the audio Importing Setting in iTunes:
1. From iTunes, click Edit, then select Preferences.
2. Click the Importing tab.
3. Select an encoder name from the Import Using drop-down menu that matches the file type that you are importing.
4. Select the quality setting from the Setting drop-down menu that most closely matches the Bit Rate of the file that you are importing.
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I am planning on buying an IPOD 40G to store my CD collection. My intention is to download everything in .wav format to replicate/maximize the CD quality format. I am very interested in finding out if the sound quality of the IPOD connection to stereo equipment is degraded. I was know there are high end hard disk recorders available on the market for stereo applications but I am looking for a cheaper solution that will satisfy my personal and home listening needs. Based on the feedback I will debate my decision on this purchase.
Thanks

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