Ok, so you just made firefly and DAAP accesible to the outside world. This certainly is possible, but this is a security risk.
The authentication required to access firefly is definetly not a strong one.
Anyway. 512 kbps upstream are a gross rate, and should do to play mp3s up to 256 kbps fine. But when you play flac or some other lossless files, Im sure that bandwith is a bottleneck.
What does the (smart) playlist tab in firefly’s config say? See any smart playlists?
Or do you see them any they just do not return any tracks at all?