The default setting for FLAC in scthom's plugin is "6", which is what I use. I have plenty of older FLACs at "5", and it all seems the same. scthom felt that "7" and "8" pay a big penalty in encoding speed and somewhat more CPU load on playback, so he set it to 6.
It really fries me that this setting in FLAC is called "quality", a term which is guaranteed to yank the chain of those of us insistent on "lossless", for which there is only one quality setting, "lossless". This is something to hammer the boys over at sourceforge about, IMO. MC uses the terminology provided by FLAC.
However, no matter what "quality" you select, FLAC is still 100% lossless.