AAC isn't proprietary, but it is patented. There are free third-party encoders, decoders and other tools available, just as it is with MP3. Technically, MP3 is actually more restrictive in terms of technology licensing than AAC.OK, they use proprietary AAC which is another annoyance of theirs, along with their MP3 players that have a proprietary port instead of just using USB like everyone else.
So, first you say iTunes sells MP3s (they don't, and never did), now you claim they use a proprietary format (they don't)? Curious.
As far as I'm aware, the Crystalizer doesn't do any expansion, compansion or upwards compression, but I haven't seen any tech docs, just measurements. If you have a link to a white paper of some sort, I'd love to see it.