The software converts the AIFF to Apple lossless before it streams it and the AE coverts it back to 16/44.1. The toslink output of the AE is also much higher in jitter than what your cdp can do. It is not surprising that a $99 multifunction wireless device can't perform as well as the transport in your player but in my experience it performs much better than "not even close to CD quality."
Were all of the signal processors in iTunes turned off and the volume all the way up?
.
Were all of the signal processors in iTunes turned off and the volume all the way up?
.