Yeah, I wouldn't use the low cut during a concert. There is usually not a need for it.
As for the difference between a WAV 48/24 and even the best (320) Mp3 the dynamic range and over all quality is night and day. Now, are you going to hear it when recording the human voice? Maybe not, but there is a difference. An Mp3 was created to lower the size of electronic files. They do this by not recording anything above 20KHz and nothing below 20Hz. In between is the commonly perscribed range of human hearing. So if the music recording doesn't have to worry about all the really low lows and all the ear piercing dog whistle sounds that instruments can actually make, the file size is much, much smaller. There are other differences, but that is one of the biggest.
For me, I almost never record Mp3 files, unless I'm doing a transcription track or something that doesn't require that it be up to the Broadcast standard, which is what I normally do for a living.
So to answer your second question, I think the answer is yes, it will be a lower quality recording. But you should look at the Zoom manual on that one. It could also just be that the output of the H1 is just a pass through from the built-in mics straight to the out of the recorder. And your recording on the camera is what it will always be, just using the Zoom mics instead of the Canon built-in unit. But look into it. These small hand held devices are not what I normally work with. And they keep changing all the time with each new version.