Hi Jakester,
I ripped all my APES using Exact Audio Copy, so hopefully they are bit perfect. In fact, one of the reasons I did it all was because many of my CDs, especially ones bought 15 years ago, were starting to age -- doing weird stuff like turning yellow. I rescued about 20 CDs by using EAC.
Yep, I've now switched over to ASIO, offered natively by the nVidia sound card incorporated into the Shuttle. I noticed a BIG difference to WaveOut with the USB M-Audio Sonica, and a very very slight difference to Direct Sound via the Sonica or the nVidia. The M-Audio Sonica does not support ASIO, even with Asio4all -- although I may try more tweaking to rule it out totally.
I'm also happy with the toslink, which among many people has a bad reputation. Recommended is a glass toslink -- a guy sells them on ebay for $30. I noticed a big jump in quality when I switched form a cheapo plastic one.
As for your popping problem -- I had a similar issue. I actually solved it by changing the encoding of all my APE files from "Extra High" to "Normal". Lost about 4gb on the HDD in the process, but no more popping and much smoother seeking too.
s.