Carried out some more testing last night on a friends (Scott) S3 with B and O, tech pack high.
Same song ( format, file size, bit rate ). USB, iPhone 5S, GS5 SD card, Bluetooth, wifi ( via connect app )
Bluetooth from iPhone and GS5 - very noticeable cracking on some songs. Sub standard not acceptable listening experience.
USB, SD, WiFi - using the exact same tracks as above at the point that it crackles the most it's still noticeable but barely just and in our opinions it's liveable whereas the bluetooth is not.
It's mainly there at the opening of a track and if it's very bass heavy or instrumental the crackling is masked so you won't hear it although it's there.
From a listening prospective usb, wifi, SD, etc whereas not perfect it's more then acceptable and thus the crackling is never present throughout a whole song it ok to live with, it is however "not right".
Now the severe problem lies with bluetooth, I suspect it's the encode / re-encode / compression at play here causing the fault, I've got a £40 belkin air connect bluetooth streaming device in my S3 8P and it works faultlessly. If you want to use YouTube, vevo, spotify then you need to use bluetooth. Some songs crackled that bad that you simply would not be able to use bluetooth without getting seriously annoyed or halving to skip through chunks of the track or turn the volume down.
The case is with Audi in Germany at the moment so be interesting to what their feedback is. I've ordered B and O on my new S3, the issues have not made me cancel it but again I won't be using bluetooth to stream music.