I think what Trent missed here is the fact that yes, if you release it for FREE they will download it in droves for FREE. But what about other ways to capitalize off of the sales, perhaps selling a T-Shirt for $4 with the album or an extra song that you can get for $0.99 only if you have the FLAC of 320 version. Think of interesting marketing.
What about a "quality upgrade" path, you download the 320 and want lossless and it's only X dollars more.