CD is not MP3 quality, even at it's highest bit rate.   However, it is usually imperceptible to most ears. Considering the source of the material, an MP3 should be fine.

Artists should be receiving royalties, just as they would from the CD sales.   This is not the old Napster technology, these are downloads from the record labels. This will be the future of music distribution - the record companies and artists get paid and the distribution is cheaper.