“Basically every millisecond the sound output of the local sound-card gets captured, encoded and then sent to a network device.”
SWYH records the current system sound via WASAPI as a tiny packet every millisecond (and uses a damn busy loop to do nothing in between, hence my thread “fix for 100% cpu usage”), encodes it and then adds it to the network stream. Whatever format / quality your sound-card outputs will be used to encode the sound stream. The source does not matter or rather the input will not be bit-wise the same as your input file (e.g. the sampling rate will be only 1KHz instead of around 44KHz+).
You can’t compare the normal dlna/upnp play to behavior windows media player uses, since they just send a copy of the file to the receiver. No encoding / decoding takes place.
SWYH and any other software (WASAPI is the only way left to record system sound btw) that captures the system sound can never have the same quality as the source file..