In my experience, I have been able to hear a difference between MP3 and CD. I don't rip stuff at 128k (I go closer to 192k so that it is tolerable for background listening), but even at the bitrates I use I can hear a difference between compressed and the original CD.

What mode are you using on the 970 when listening to each? I could see a possible scenario where MP3 in straight stereo might be preferable to CD in a matrix surround processing mode simply because many people (myself included) prefer music in two-channel mode.