Actually almost anyone can play back lossless formats. Any iPod except the shuffle can play back Apple Lossless (ALAC). And almost any other kind of [non-iPod] player can play back FLAC, either natively or via
Rockbox.
The actual lossless format provided doesn't much matter since, being lossless, they're easily transformed one to another without, well, loss.
There's already a LifeFlow
CD option but its price is higher. I'm suggesting that a third option between downloadable MP3 and physical CD in terms of sound quality+price would be a welcome addition for, say, the frugal audiophile demographic. :-) Meanwhile, I'll address anything further directly to support.