Hi.
For what its worth, I too have come across this exact problem.
I built the 1359 install using rsimmons documentation on my LS11.
I tried a test session the other day using FLAC for the first time, and found that my SB’s failed to play them, it was exactly the same problem, just needed to add the path to FLAC and WAVSTREAMER in the mt-daapd-ssc.sh file.
I am trying to convince myself that FLAC sounds better than 320K mp3, (It certainly should) but alas my ears don’t seem to be able to detect the difference, 🙁
Pete