I've been running v3alpha8 for a good number of months now, with my entire CD collection encoded as Ogg Vorbis at 192kbps. To me it sounds as good or better than the 320kbps MP3s I used to have.

And as for gapless playback - never any problems. Those who listen to TOOL may know how difficult it was to get a smooth transition from Parabol to Parabola. When I had gapless MP3s (LAME, of course), that was the one transition that never came out right.