Sound files can either be 8 or 16 bit .WAV files. I usually have my in-game sounds exported as 8 bit, 32000 Hz .WAVs, because the sound quality doesn't drop too drastically and the filesize is about half that of a normal .WAV file. If the sound needs more quality, I use 16 bit 44100 Hz instead.
If you want the sounds to be 3D (fade out based on distance), they have to be mono. In general, you want all your sound files to be mono.
However, Blockland CAN use stereo .WAVs as sound files, but not stereo .OOGs for music. If you use a stereo .WAV, the sound will not be 3D when played, but instead play at a constant volume no matter the players distance.
Using stereo .WAVs is alright for server-wide music if you absolutely need the quality, because there is no size limit. I strongly advise against it, though, as the file size will make anyone leave your server because of the obscene download time.