My reply to the OP:
I ripped all my CDs in wav format. I use a Xitel USB-to-Toslink device plugged into my laptop and play the files on MusicMatch (recommended by Xitel and works with my 1st gen iPod). The other end of the Toslink cable is plugged into one of my 950's inputs.

I've done side-by-side tests playing the same track on both the laptop and the original CD in my DVD player (using optical connection) at the same time. I can easily and quickly switch back and forth between the two sources mid-track and, after many tests, can not hear difference between the two. This makes sense in my mind because all we're moving around is ones and zeros. As long as all the ones and zeros are still in the same order from both sources, the 950 sees the same data and provides the same output.

I also occasionally bring my XM SkyFi 1 in from the car and plug it into my system. The sound qulity of sat radio providers is generally considered to be poor (somewhere between FM and CD). Even so, it sounds fantastic on my home system; waaay better than in the car.