For a well designed computer, case on is actually better thermally than no case. As was indicated before, airflow is often better than empty space. Lots of factors contribute to this, and in a large open space with a fan still on the CPU heatsink, it's probably not appreciably different.
As for audio quality, 192k MP3 is transparent (meaning indistinguishable from the original source, usually a CD) for most listeners on typical PC equipment. Listeners who know what to listen for or users of higher end equipment may still be able to tell in a side-by-side test, but a quality 192k MP3 encode (e.g. LAME) is usually not objectionable even in such cases. 320k MP3 even with a sub-par encoder (e.g. the old Xing encoder) is usually transparent to most listeners, even those who know what to listen for, on reasonable equipment. If in doubt, just use FLAC - it's 100% identical to the CD.
Me personally, I find that lame default presets (current version) is transparent around 256k ABR using an M-Audio Revolution 7.1 and Klipsch Promedia 2.1. Note that this is a better sound card than typical in terms of audio quality, and these are pretty high end speakers for PC speakers. Music with lots of subtle cymbals or strings may not be transparent to me even at 320k, but most stuff is. Vorbis (OGG) and AAC (MP4) are usually transparent to me at slightly lower bitrates e.g. 192-224kbps ABR. Again, it depends on the type of music, and I don't know the artifacts of AAC as well as I do MP3 or Vorbis, so I'm less apt to notice even if it's just as objectively bad.
Interestingly, typical rock music, despite sounding complicated, is one of the easiest genres to encode lossily as electric guitars lend themselves to it. Classical is one of the most difficult due to the acoustic strings, concert percussion, and pianos.
Note that if you plan to re-encode things, e.g. for use on a portable player, it's important to have a high quality source as the re-encoding process can emphasize artifacts that you wouldn't have noticed in the higher bitrate version and wouldn't be present if you started with the original. This isn't particularly relevant to a jukebox application unless you plan on using it as a central repository to populate other devices.
I used to rip CDs to -q 8 Vorbis (~256kbps). Now that hard drive space is cheap, I use FLAC. Typical bitrates for FLAC are 500-900kbps (a CD is about 1400kbps), and again, it's identical to the CD so no problems with quality.
(This is probably a whole lot more info than you wanted, but hopefully it's interesting and/or useful)