The reason I chose MP3 over FLAC was simply for compatibility purposes with all my media devices. My cell phone, iPod, car stereo receiver, SACD player, PS3, and media server all support it and not FLAC (universally). If all of them supported FLAC, I would have certainly had used that format or better yet pure PCM WAV format if it was practical. On my home theater I usually playback everything on disc unless it's a title I have only on MP3. Not to mention I really don't feel like going through the time and trouble of reextracting my whole catalog in a different format, at least not right now.
But anyway, I installed Realtek's new driver update, and it seems to be of higher sound quality. I don't notice any obvious distortion on the titles I have played back so far. They must have done a lot of tweaking.