That's correct. CD is it for direct digital to the audio system (one DAC). The SD card does not support any lossless audio formats either, which would also only involve one DAC.

I'd still stick with the iPod interface even with the extra DAC if you have lossless audio files as your source. The amount of sound degradation that occurs from using the iPod internal DAC is miniscule when compared to any degradation that occurs from compressing music files to even the best quality lossy format. It's not as though the iPod DAC is crap either - far from it. Yes, it sucks that an extra DAC step is required if you have lossless audio files, but it's better than the lossy conversion, IMO.

I listen to a lot of techno/dance/trance music and I'll be the first to tell you that even with best quality lossy file formats, the music data loss from a lossless to lossy conversion on any "complex" music is significant.

I'd do lossless audio files from an iPod touch (or old iPhone you aren't using anymore) so you can still do over-the-air music updates via WiFi. Mount it permanently in the glove box, connect it to the MMI and call it a day.

 

In theory that sounds right. But then try the reality check. Take a CD and upload it to your iTunes or similar library any way you want to. For me, that is at max. bit rate AAC, but not lossless. Then plug in your i-whatever device via hard cable MMI and play tracks of your choice back to back to the original CD.

BTDT on my 2006 A8, with conventional A8 Bose (albeit at similar total nominal watts to current Q5 B&0)--rather than the yet more sophisticated A8 B&0 that came out the next year (2007). Since it has a 6 disc player, I've done it a bunch of albums over time. When the Q5 gets in my hands in coming days finally, it will get the same real world, vehicle on the real road test. The net from the W12 A8 and acoustic glass, tons of insulation and all--that Q5's would never get in the same realm of overall listening quietness--is my average ears can't hear squat worth of difference, back to back, same tracks, same CD as the original source for what then comes through the iPod Touch and MMI.

And to top that by the way, essentially the same result with A2DP when the dealer gave me a 5 day loaner of a current D4 generation A8 with the yet next gen. of sound system, etc. (albeit still Bose, > 500 watts nominal total). I didn't bother to throw a CD in the drive, but back to back identical tracks with iTouch flash vs. iPhone A2DP connection with Bluetooth that is factory supported in the current A8. The underlying contributing library was the same--uploaded iTunes from my CD's at max bit rate on side by side supported player devices. That one pleasantly surprised me; not as much exhaustive and repeated testing as in my now 7 years with A8 MMI (and CD's) but good enough to have me conclude it was at least hard to find a real world delta on the road.

Thus theory understood, but my real world test and ears in a real world car environment--a very quiet one at that--couldn't find any obvious perceived differences.

And on the other hand, try it sometime with Sirius vs. any decent copy from any of MMI/iPod or A2DP or now old fashioned CD, and the difference is almost laughably and painfully obvious, at least to my again average ears rolling down the road.