Apple TV - audio support - ******** PLEASE HELP

Please help!
I am considering to buy an APPLE TV but I don't want to waste the money if it won't work with my system. I desperately need some guidance:
I have an extensive library of music on my Win XP computer. The library is all in MP3 format (encoded at rates 192-256K). I encoded all of these over the years from CD's (I have tossed the CD's after I ripped them). So now I have this extensive (1000+ song) library. Well, I would like to play them on my home audio system (and not my computer which has s6%%& speakers).
I have an NAD receiver which has an optical digital audio input. The ATV has an optical digital audio output. My aim was to download (actually download to the ATV HD, not wirelessly stream from my computer as this requires my computer to be always on. I am a securities trader and my computer is too busy on other aps).
In order to view the library of music (all MP3 songs) I would connect the HDMI (or component) to my LCD TV which has all of these connection inputs.
A few questions (please):
1) Is it possible for me to DOWNLOAD all of my MP3 songs from my computer to the ATV?
2) If the above is possible, would I be required to "convert" my MP3 library into the iTunes format for playback or could I just play the audio file in the MP3 format?
3) If I am forced to convert from MP3 to itunes format won't there be some loss of audio quality in the sound caused by re-encoding process?
4) Is the digital audio optical connection going to produce good sound (I have a great NAD AV receiver and speaker system that has great DVD and CD sound playback)?
5) All I want to do is to have good sound from an easy to read library. I don't want to be forced into using iTunes proprietary control format (believe me, Apple is banking on controlling the music industry this way. I served on the legal review of this some years ago). I looked at using the Sony PS3 as a device to accomplish my objectives. However, I am concerned that the sound card on the Sony PS3 may be inferior to the ATV sound card.
I really don't care about downloading videos, playing back photos, or ordering items from the iTunes store. I just want to get good quality sound playback and I want to know if the ATV is the best device for this?
Desperate for anyone's expert advice.
Thank you so much for answering.
JM

jonmiller wrote:
I have an extensive library .....all in MP3 format (encoded at rates 192-256K). I encoded all of these over the years from CD's (I have tossed the CD's after I ripped them)
Why on earth did you throw away the CDs ???
Real shame as you've now lost the original quality songs.
A few questions (please):
1) Is it possible for me to DOWNLOAD all of my MP3 songs from my computer to the ATV?
If the MP3s are less than 32GB total tehy'd fit on a 40GB AppleTV (It has 32GB of usable space).
2) If the above is possible, would I be required to "convert" my MP3 library into the iTunes format for playback or could I just play the audio file in the MP3 format?
Highly unlikely - I've had some MP3s that don't play on some devices due to experimental encoding strategies but you should be fine.
3) If I am forced to convert from MP3 to itunes format won't there be some loss of audio quality in the sound caused by re-encoding process?
Converting lossy format to lossy format will always lose quality - whether or not it's perceptible is another issue. I doubt you'd have to though.
4) Is the digital audio optical connection going to produce good sound (I have a great NAD AV receiver and speaker system that has great DVD and CD sound playback)?
As good as the quality of your MP3s,
5) All I want to do is to have good sound from an easy to read library.
A 40Gb AppleTV is worth the money for that alone IMO.
I don't want to be forced into using iTunes proprietary control format (believe me, Apple is banking on controlling the music industry this way. I served on the legal review of this some years ago). I looked at using the Sony PS3 as a device to accomplish my objectives. However, I am concerned that the sound card on the Sony PS3 may be inferior to the ATV sound card.
The sound card is irrelevant if outputting digitally, but the quality of the software/hardware decoder for MP3 might be relevant. In practice i doubt you'd have a problem.
MP3s, WAVs etc will be converted to PCM audio for playback via optical from AppleTV - will the NAD accept this? - I'd be surprised if it didn't.
One real pain with the PS3 is that only one audio out is active at a time so you end up swapping settings all the time.
I really don't care about downloading videos, playing back photos, or ordering items from the iTunes store. I just want to get good quality sound playback and I want to know if the ATV is the best device for this?
It's an excellent device for this, but I doubt it's the best if you had money to burn on audiophile media center solutions...
AC

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