but imagine if the lossy file was of mpc quality!
Noise shaping in this case essentially moves noise from an area where it's completely masked by the music into the range where there's nothing to hide it. This seems to turn conventional noise shaping theory (where the idea is to move the noise away from the music and leave greater S/N in the midrange) on its head. What do you think?
If you place the noise in the 3-5kHz region don't you risk bringing the music to distortion, since I have read that this region of the audio spectrum is most susceptible to this.
However, one thing about convolution-based (finite impulse response = FIR) sub-band splitting and recombining (the sort I think is used in many EQ plugins) is that the audio stream is not divided into blocks, transients are perfectly reconstructed and there are no boundary problems.