A little while ago Ogg Vorbis was possible. What happened to it?
As far as know it supports streaming and provides better quality than MP3, especially at the lowest bitrates. Vorbis is quite usable at about 64 kbps (-q 0), MP3 is really bad at that bitrate. In addition, the highest Vorbis Quality settings are better than MP3 ever. I have previously used Vorbis -q 10 (~350-500 kbps) as an alternative to lossless when I have played APL files through the server. The server doesn't understand the APL system, but I was able to play them when converted. Lately I have used the shared library option and I haven't tried the encoding options for some time now.
Actually, you could also provide WMA Lossless or FLAC for those who have APL files in their libraries. Both formats should be streamable. On a fast LAN the file size doesn't matter and I would prefer FLAC -q 0 because it is the fastest lossless format & setting to encode and decode.
Or does this have something to do with the cover art handling? How does the server handle cover art when the files are converted?