This was an interesting read. I have lurked for awhile but I thought I would chime in with my first post.
I have been a vinyl/analog guy for a long time. I recently decided to start transferring my music to a music server. After experimenting I decided to use JRiver Jukebox for playback. I tried Foobar2000, Winamp, and JRiver and I felt that JRiver had the best SQ.
I bought an ADL Esprit so I could use the DAC for CD redbook, stream music from a music server via USB, and record some needle drops. Since the Esprit had a headphone amp, I dusted off my Sennheiser HD600s and I was pleasantly surprised how good they sounded.
I decided to use Audacity for recording my need drops and save the files as 24/96 WAV files.
When I converted the 24/96 WAV file to FLAC, the file size dropped and so did the SQ. I used the FLAC converter built into JRiver. For fun and games I converted the WAV to MP3 using Koyote Free MP3 Converter to see how that would impact the SQ.
I consider my system to be transparent and high resolution. I asked my wife to listen to the same song (WAV, FLAC, MP3). She consistently picked the 24/96 WAV as the best sounding. That matched my impressions as well. I would rate the results as WAV > FLAC > MP3. I let a co-worker with good (and considerably younger) ears listen to the same songs in the different formats, and he said the 24/96 WAV sounded the best. Although I like the sound of 24/96 WAV files, I dislike the lack of standards for tag support.
The audible improvements are minute and subtle. The WAV sounded slightly better than FLAC, and notably better MP3. The differences are as the OP stated, more air, better separation, increased dynamics, and a sense of you are there.
A lot of people focus on analytics and measurements as a means of discerning audible differences. A perfect example is USB cables (and digital cables) that supposedly carry 0/1s; however, my experience is they do have an audible difference. For example, I found that Wywires USB sounds the best in my system, and that is supported by more than just my ears.
This seems like a great community. For an analog dinosaur like me I appreciate the wealth of knowledge. I even took the plunge and bought a Clip + for my wife and for when we travel.