Does keeping your music in Lossless slow down overall performance?

Playing a losslessly compressed file is slightly heavier on the CPU than lossy, but this is negligible with modern hardware; The size of your library has nothing to do with performance issues, files written on the hard drive, as large as they might be, will never slow down your pc. 

my itunes library is about 820 songs, and itunes is running less than 2% processor usage. all songs are ripped from CD to lossless, but they are being streamed from my NAS drive over a gigabit network.

Audio files are trivial to encode and decode these days, and any desktop or laptop made in the past decade can process them in large multiples of real time (meaning: It can play music back faster than you want to listen to it). Since you indicate there are other things going on when the music files are stuttering, you might want to see if there's anything else causing your computer to slow down. Often, it's computer-wide RAM utilization, rather than the CPU being taxed, which causes severe system slowdowns.

On Windows, you can check the Task Manager (on Macs, it's the Activity Monitor), and see if anything seems out of line. For example: When I'm using Firefox in a power-user way (multiple windows, with a few dozen tabs per window) and leave it running for a week or so, it'll bring almost any computer I use to its knees. That's not good, but it's not harmful either: I quit Firefox, restart it, and I've got my computer back.