Sorry, but your stereo's not very good ;-)
One thing audiophiles like to say is that you don't need an equalizer or bass/treble controls to listen to music with a good stereo. However, this rule pretty much applies if you have at least a $3000-ish stereo system. And you must have well-mastered, non-compressed music.
All my music is stored as ALAC, streamed to my Airport Express, and fed to the stereo with an optical cable. My brother was visiting once, and I mentioned how this stereo really does work without fiddling with an equalizer. In my absence, he hooked up his iPod to the computer and listened to his 192 kbit AAC audio, and in order to get it to sound good he had to fiddle with the bass & treble. When I came back he mentioned this, and showed me how it sounded without the adjustments (it was pretty flat). I have some of the same music he does, so I showed him how the same song sounds with lossless audio (with the stereo still having no adjustments). His jaw dropped. There was BASS and clear, distinct treble. It's just not there in compressed audio (at least, with 192kbit AAC. MP3 is hopeless).
If you have a single instrument playing solo, it doesn't really matter what codec you use. But once you add layers of instruments, or voices, that original instrument is going to sound pretty muffled with a poor codec.
Unfortunately the biggest problem with audio quality is the loudness war. Uncompressed music is unforgiving, and the loudness war is badly distorting the raw audio we get on CDs now. Right now the best way to get audio is DTS audio on a DVD. The loudness war has no affect on that, because DTS is a compressed format, and 'loudness' is just part of reconstructing the signal (and the dynamic range of DTS is phenomenal). Unfortunately, you can't get much music that way.