I did some tests using AAC a while ago, using an old Apple Powerbook as a source feeding a 'Nail' based system (thankfully now sold!)

To start with, I imported several CDs onto the HD in Apple lossless format, then produced lossy versions in iTunes.

Using 128k MP3 there were obvious swishing and swirling artefacts during high frequency sounds such as cymbols.

Going to 128k AAC made a huge improvement, and I had to struggle to tell the difference from lossless. At 256k AAC (or above), it sounded perfect. I couldn't discern any degradation from lossless at all.