| I use MP3s all the time in the car. You need to rip at 192kbps before the sound quality is any good. If you have already ripped at a lower resolution you will have to rip it again. Although you can convert a low bit rate MP3 to a higher bit rate the data is already missing so you will not get any improvement. Apple lossless is ok but it is not really lossless. That said, CD is a lossy format if you want to take it to extremes!
One way you can test if there is a problem is by creating a MP3 disc to play in the car. If the sound via the CD is better than the gateway then maybe there is a fault. | 
