Under Advanced/File Types „Prefer native format“ should be activated. Apart from that you can see the bitrate and the format of the stream during playback in the server’s web interface. If this matches the original format, no conversion takes place. Regarding your error messages, there could be a problem with Icecast as well. The best thing to do is to ask this question again in the Slimdevices forum. There you can get in touch with the developers of the Squeezebox server.