MP3s themselves can often have an overly compressed dynamic range and the direct audio input won't correct that.
I use the USB port for a thumb-drive with my MP3s and most of them sound great - but not all of them.
Depends on codec. MP3's are generally put into a single category, but it's WHOLLY inaccurate. MP3 are the SAME technology as CD, it's digital. It's all converted from some TAPE or analog stream, just because its a MP3 FORMAT does not mean its LIMITED. I have a collection of MP3 and depending on the AMP \ head unit I will bet you $1000.00 you CANNOT tell the difference, because I have already WON this argument MANY times, and it's all in how the MP3 are done, software, the device used, the source.. ah.. there is the MAIN culprit which people do NOT realize, sometimes the SOURCE is the problem which is why I LOATHE records, they completely SUCK, listening to pops and gaps in music is NOT natural it's STUPID. CD\MP3 allow a MUCH cleaner less distorted experience than ANYTHING else, PERIOD. Again won this argument MANY times.. I know how to select the RIGHT AMP head unit to make a car sound better than most of the crap that's out there, and I can GUARANTEE you MP3's format are NOT the problem.
If your source is crap so will the output (MP3). I can record a CD to MP3 with a GOOD codec and it's indistinguishable.. from the CD, but MP3 actually allow for MORE range than a CD, because CD players are pre-set, MP3 are not, another thing to keep in mind.. its all about the player and MP3 PLAYER not MP3 technology, propagating incorrect information will not help.
Anyway.. MP3 are AWESOME and I CAN and have proven it. You can't just categorically put MP3 and lump them together as lossless, compressed sound and say "that's how it is", that is complete and utter BS!
People have gotten into my car and SWEAR I have a source OTHER than MP3, and ever since MP3 has been released that's ALL I use, even as a DJ (but that's another story for another Day).. people have been TOLD MP3 have gaps and can't do high or low range, or do this or do that.. it's ALL BS, as I can attest.
choose the RIGHT source pay attention to recording type, ADA (analog to digital to analog conversion).. and here is a fun fact studio music is recorded to what format? I will give you a hint it's NOT direct to digital. so there is ALWAYS some conversion of the studio records using equalizer that also has an affect because you are listening to HOW that mix master WANTS you to.. another problem with the source.
It's ALL about source and conversion and codec, garbage in garbage out.. I sample my music I have 30G worth of music that I have personally selected as the highest quality 256K crisp sound that I keep, another reason I HATE streaming music and why I use Google music. because google lets me upload my OWN library.. so I can play MY music to my device not that default 64K garbage you hear on Satellite radio.. yeah its digital but the higher the quality the more bandwidth it consumes, you think XM cares if you get high quality, hell no, in fact they don't WANT you to like the output so much so you don't be encouraged to record it..
Anyway, my tirade is over, but just know you can't and should not generalize about MP3, MOST of the information is just WRONG and I have proof.