I think there are some diminishing returns and you need multiple components to line up. I have decent (€250 or so) headphones, the M3K and high quality MP3s and then I definitely hear a world of difference compared to e.g. stock iPhone buds on an old iPhone with 128k MP3s. But I doubt that I would notice a difference with still more expensive headphones, FLACs and a more expensive device.
On the setup I have 128k/transcoded MP3 also definitely has less interesting detail than higher quality files.
On the setup I have 128k/transcoded MP3 also definitely has less interesting detail than higher quality files.