I'm not sure I'm understanding what your describing. I don't stream from the Internet.
If you use a Logitech User Interface to play a WAV file on a Squeeze player, then LMS fetches the file data from disk, converts it to PCM format, and pushes that to the player using proprietary commands. The data fetch is done by a disk read operation, and
not via the HTTP protocol. This is called "playing"...
But if you use a third party UPnP/DLNA Control Point (such as MC) to play a WAV file to a player, then the UPnP/DLNA plugin (be it Logitech's own plugin or Whitebear), instructs LMS to fetch the music data from MC by means of an HTTP request. Whereupon LMS converts the data and pushes it to the player as before. This is called "streaming"...
LMS can "play" WAV (i.e. it can fetch the data from disk), but it cannot "stream" it (i.e. it cannot fetch the data by means of an HTTP request).
The only formats that LMS
can "stream" are MP3, WMA (lossy), AAC, and FLAC -- and the latter is the only lossless streamable format.
LMS own UPnP/DLNA add-in does not have a work around for this problem. If you insist on using the LMS own UPnP/DLNA add-in, then you must tell MC to transcode the data to a lossy format that LMS is capable of streaming. This means using the lowest common denominator format = MP3.
On the other hand Whitebear can recognise this issue and in such cases it interposes itself as an HTTP proxy that fetches lossless WAV (or PCM or AIF) data from the Control Point (such as MC) and feeds it on to LMS (and thus to the Squeeze player) as FLAC.