Apple Lossless is 'Packed' more than it is compressed. The data is packed in a way more akin to a .Zip or .Sit file - ie there is no Psycho-Acoustic compression like there would be with an MP3 or less-than lossless AAC file.
So in terms of audio waveforms, nothing is thrown away when 'packing' the file losslessly which is where the term lossless comes from.
So, to re-iterate, the OP's thinking is correct in terms of audio quality being retained when using Apple Lossless. The Mac will convert (on the fly) anything that isn't Apple Lossless already into Apple Lossless as it streams via Airtunes.
I'm not sure what happens with Hi-Res Audio, but I suspect that for the purposes of streaming via Airtunes, these would be down-converted to a 16/44.1 variant of Apple Lossless. So, in essence the only potential area for a quality loss is when using hi-res audio files. I haven't really looked into this though.
The Apple TV, playing files directly, will not convert any 16/44.1 files to lossless and will pass audio 'as is'. So any WAVs or AIFs will not be losslessly packed which saves the poor old Apple TV from working too hard.
The main part to remember is basically where the audio is originating from:
Streamed over Airtunes: The Mac will convert to lossless and send the lossless stream to Apple TV, Apple TV will decode lossless stream. = SAVES NETWORK BANDWIDTH
Played Direct from Apple TV internal drive: No re-encoding of format, just direct decoding of whatever format files is stored in. = SAVES APPLE TV PROCESSING POWER
Message was edited by: Easybourne
Message was edited by: Easybourne