I don't quite understand why there is so much negativity shown when a musician, or anyone who cares about sound quality, points out that people are choosing convenience over quality, which I took to be the meaning behind Lou Reed's statement in that article. We, here at head-fi, spend gobs of money on trying to achieve the highest fidelity sound reproduction that our wallets can afford, yet there is backlash against a musician who says that the masses aren't prioritizing the fidelity of the music they're listening to, which appears to be true. It's akin to people who tell me that I've wasted my money on good headphones because they can't hear the difference (or don't care) and are convinced that I shouldn't be able to, either.
I don't know that I would "pass" a double blind test (though that's not how I listen to music). Sometimes I am not satisfied with an mp3 because it seems flat, or the cymbals sound out of whack, or the bass is flabby. Sometimes I wonder if it's all in my head. What I do know is that there have been real improvements when I invest in upgrading equipment to play my CDs and LPs, all in the search for higher fidelity. My investment in things designed to play mp3 files has been about convenience (portability).
The trained musicians I know, especially those who play un-amplified instruments, care deeply about how their recordings are reproduced. They want you to hear what they intended. If you can hear the difference in formats, I say more power to you. If you can train yourself to hear the difference, more power to you. If you then endorse the format that you find to be the highest fidelity, the most true to the music, then more power to you. If you find that a well produced mp3 is indistinguishable from an SACD in your playback setup, then maybe your search for higher fidelity is over.
As for the quality of recording, I agree, the public and the producers should demand better recording, mixing, and mastering. I don't see it as an either/or situation, though. Better for all if both the production and the playback were improved.