CDs were developed back in the late 70s/early 80s, so they had to deal with the tecnology they had at the time. Information theory says you need a digital sampling rate twice that of your bandwidth to accurately encode a signal. Since most people can’t hear above around 17khz, a 44.1khz sampling rate should be good enough. The 16-bit sampling is more likely the limitation of sound quality. I highly doubt anyone can tell the difference between 48khz/24-bit (normal DVD LPCM) and 96hz/24-bit (DVD-Audio). There’s stilll some 48khz/24-bit audio DVDs put out in UK. Perhaps the market thought that was good enough.
As for compressed audio, the main problem is the use of low bit rates. 128kbps mp3 music sounds hideous to me, though a lot of people think it’s fine. Personally I encode at 192kbps AAC (in iTunes) after a lot of experimenting to see at which bit rates I could notice the difference. For me, I can’t tell the difference at that rate. With mp3 I can hear a difference up to 224kbps.
In either case, it’s quite possible that you can tell a difference. If so you’re unusual enough that nobody can make any money off targetting your capabilities. Sorry 'bout that.
I haven’t used CDs much at all for several years now. I’ve been ripping them first to mp3 and later to AAC. When I buy CDs these days, they get popped in the computer for ripping and then go into storage. I occasionally buy stuff on iTunes Music Store if it is an exclusive or hard to find, but I prefer ripping things myself for the higher bit rates. This also saved me from having to move my music collection phyiscally to Taiwan. It was much easier to bring over one hard disk than 1000 CDs.
The main drawback of the iPod Shuffle is the lack of an LCD. I’m told by others that it actually works well despite that, but I’m still skeptical. The iPod mini is intriguing to me, but it’s a bit too pricey at USD250 for 4 gigs of storage. I’m hoping they come out with a 10 gig version and/or lower the 4 gig price at some point.
The main advantage Apple has is that their user interfaces are excellent and easy to use. My wife bought an MSI mp3 player a while ago and the user interface is hideous. She and I were constantly fumbling around trying to get it to play the right thing. That and it doesn’t show ID3 tags, just filenames, and only displayed Chinese using the Chinese firmware, Japanese only with the Japanese firmware, etc. Not very useful for those of us with stuff in both. The iPod and iPod mini are very easy to use and support all languages.