I think the best way to handle this would be to just encode everything and upload all files. If I wanted some amount of history, I’d use some file system with automatic snapshots, like ZFS.

If I wanted to do what you’ve outlined, I would probably use rclone with filtering for the extension types or something along those lines.

If I wanted to do this with Git specifically, though, this is what I would try first:

First, add lossless extensions (*.flac, *.wav) to my repo’s .gitignore

Second, schedule a job on my local machine that:

1. Watches for changes to the local file system (e.g., with inotifywait or fswatch)
2. For any new lossless files, if there isn’t already an accompanying lossy files (i.e., identified by being collocated, having the exact same filename, sans extension, with an accepted extension, e.g., .mp3, .ogg - possibly also with a confirmation that the codec is up to my standards with a call to ffprobe, avprobe, mediainfo, exiftool, or something similar), it encodes the file to your preferred lossy format.
3. Use git status --porcelain to if there have been any changes.
4. If so, run git add --all && git commit --message "Automatic commit" && git push
5. Optionally, automatically craft a better commit message by checking which files have been changed, generating text like Added album: "Satin Panthers - EP" by Hudson Mohawke or Removed album: "Brat" by Charli XCX; Added album "Brat and it's the same but there's three more songs so it's not" by Charli XCX

Third, schedule a job on my remote machine server that runs git pull at regular intervals.

One issue with this approach is that if you delete a file (as opposed to moving it), the space is not recovered on your local or your server. If space on your server is a concern, you could work around that by running something like the answer here (adjusting the depth to an appropriate amount for your use case):

git fetch --depth=1
git reflog expire --expire-unreachable=now --all
git gc --aggressive --prune=all

Another potential issue is that what I described above involves having an intermediary git to push to and pull from, e.g., running on a hosted Git forge, like GitHub, Codeberg, etc… This could result in getting copyright complaints or something along those lines, though.

Alternatively, you could use your server as the git server (or check out forgejo if you want a Git forge as well), but then you can’t use the above trick to prune file history and save space from deleted files (on the server, at least - you could on your local, I think). If you then check out your working copy in a way such that Git can use hard links, you should at least be able to avoid needing to store two copies on your server.

The other thing to check out, if you take this approach, is git lfs. EDIT: Actually, I take that back - you probably don’t want to use Git LFS.