Well I had a chance to use the Zune HD 64GB mp3 player and I can say that the audio is NOT better to the Ipod touch but rather equal to, but again you ge what you pay for.  
Zune is not as user friendly and limits the hardware you can use with it. I wasn't really that impressed with it's usability or versitility. 
btw, The Apple Ipod can handle .flac files via the FLAC player program via itunes store.