I agree regarding the FLAC streaming.
My impression is, without FLAC streaming, the SB Touch is very near “the edge” of its networking capabilities at 192k. When it goes over the edge, the symptoms happen. Moving to VM, and other things that you guys are testing is pushing it closer or further from the edge a little bit, but they’re not central to the issue.
From our perspective, the real next step here is to test again once FLAC streaming support rolls out with 1.3.