[El Bishop]

So if I am sending music from iTunes (ALAC) wirelessly to the airport express, which is connected via a 1/8" analog output to red/white av cables to my NAD receiver, what kind of quality am I losing (assuming I'm not judging with my ears and based only on the bits and bytes)? Does it stream the full ALAC file?

 

[flohmann]

Yes, the Airport Express is bit transparent (assuming you've set it up right), according to Stereophile's review. But the DAC in it is nothing special. You'd do much better to use the optical digital out from it into a jitter-resistant DAC (e.g., Benchmark DAC1). Jitter rejection is important here. Even using lossless bits, the CD sounded much better than the Airport feed through my Mark Levinson 390S (which has a digital input). Using the Benchmark, in contrast, leveled the playing field between the CD and the lossless ALC file via Airport.

 

[krmathis]

AirTunes stream using Apple Lossless, so you wont loose any audio data.
As mentioned above, the DAC in the AirPort Express is nothing special though. So you will most certainly head an audible improvement if you use the AirPort Express' digital and an external DAC.

 

[wilsynet]

Streaming to the Airport Express, you can expect that the TOSLink output will be bit perfect, but not free of jitter. In fact, it's reputedly quite jittery.

Outboard DACs will compensate to varying degrees, but at the end of the day, it's an inferior transport as surely less jitter is better than more jitter, and whatever jitter correction is applied by your DAC is most certainly a best guess proposition.

As for the analogue output, I agree with everyone else that pretty much any outboard DAC will do better than the Airport Express built-in DAC.