> > DJ's should be paying for the music they're playing.

They are, separately from obtaining the material. Look up "performing rights" (which is specifically for songs; it's analogous for recordings, can't remember the exact name now).

> Also, using .mp3 as DJ is unwritten crime.

I would like to meet the person who can hear problems with well-encoded 320kbps mp3 when played in a crowded and noisy club.

TL; DR: Music quality > Sound quality for me.

One DJ, Errorhead IIRC, recorded a track from a taxis stereo in colombia, crowd goes bonkers every time he plays it. I once had a DJ spinnin vinyl bore me to death, made me sad to think about how much he spent for those records. I much rather have bangin tunes in mp3 than that. Physically there might be a difference, mp3 filtering out stuff you "can't hear". Should affect the deep bass you can only hear and feel on a clubs PA.

I discovered awesome music in the worst quality you could imagine, midi files via a cheap soundcard. Even with plastic guitars, Led Zeppelin still sounds awesome.

I doubt you can tell the difference with lossy and lossless with a constantly clipping club sound system.