Lossless vs. AIFF --- which is better ?

Question

I have a 160Gb iPod Classic and would like utilize the highest quality file format possible for the music I store on it so that everything sounds as good as is possible, but if I can save some space and not lose any sound quality I'm all for that. I typically play my iPod through high quality earphones (Shure SE420s) or through my home stereo system, which is also high quality. All of my music is from CDs, and most of them are digitally remastered. I have transferred all of the music that I want on my iPod to my hard drive as WAV files because I frequently edit them (for example I'll split a really long track into several smaller ones to allow me to quickly get to logical sections of the track, and it also allows me to play all sections back "seamlessly" when I use the gapless playback feature) --- so loading stright into iTunes isn't really an option for me, and that's fine. I would just go with WAV files in iTunes and on my iPod but my understanding is that you can't have Artwork with WAVs, and Artwork is something else I would really like to take advantage of.
So assuming I can't have Artwork with WAVs (can anyone confirm this?), I would like to convert everything to either Lossless or AIFF but don't know which way to go --- I know AIFFs take up more space but I don't know if Lossless is truly "lossless". My understanding about AIFF is that it's Apple's functional equivalent to the WAV file --- fully uncompressed and is capable of the same high bit rates that WAVs are capable of (e.g. 1411kbps). What I've heard and read about Apple Lossless format is that it is compressed but not lossy --- it contains the full audio content of the original WAV or AIFF but in a more compact format, and does not remove any audio content. So is the Lossless format TRULY "lossless", or is what's lost just typically not noticeable by the average person's ear ? When I convert WAV's to AIFF the bit rate stays the same (1411kbps) and the file stays the same size. When I convert a WAV to a Lossless, the Lossess is typically about 60-65% of the size of the original WAV, and the bit rate typically ends up at about 800-1000kbps --- so that tells me that something IS being lost --- I just can't confirm with anyone at Apple whether what's lost matters, or whether it's even possible to notice it.
Can anyone comment on this topic and provide me with some straight-up facts about the true differences between lossless and AIFF, and which differences really matter ?
FYI, one Apple rep I spoke to said that if I convert WAVs to Lossless, then when I play the Lossless files on my iPod they get converted back to WAVs ... so literally nothing is lost. An Apple Product Specilaist I spoke to after this said no that's not how it works, and there is a sound quality difference between WAVs and Lossless. So I can't even get consistent answers/facts from Apple themselves !

Answer 1

The reason I asked about buffer size is because I was having a problem with gapless playback. In iTunes I had my tracks all set up for gapless playback and they would play just fine there (seamlessly), but on my iPod I would sometimes get little mini-pauses between tracks when tranistioning from one to the next but others would trnasition just fine --- and on top of that I didn't always get the same result between the same two tracks ! In addition, I would also occaionally get longer pauses in the middle of a track. This would hapeen with both Lossless and WAV formats, and oddly enought it seemd to be more frequent with the Lossless format. I talk with Apple Tech Support about it and asked them if it could be either the cache size or how the cache is being managed internally, and they said no the cache size and how it's managed should be able to account for the extremes of many little tracks being queued up in it vs. only part of one large track being able to fit. Bottom line, they said you should be able to experience gapless playback no matter what the size of your individual tracks are, and the cache should be able to properly manage things. So they seemed to think it was the hard drive itself failing and recommended just swapping out for a new unit since it was in warranty.
I haven't re-loaded my iPod yet since getting the replacement because I was wanting to first find out about the differences between the file formats that I initially asked you all about. I'll let you all know if I experience any more problems with gapless playback on the new unit.