i leave my rips as-is, unless they are flac/ape, when i re-encode them to mp3/320cbr. i have an iriver S10 (2gb) which holds about 250 mp3s (mixed 192-320 files)... and to be honest, i never listen to more than 50 different songs within 24 hours. considering that i plug it into my computer to charge every night, i just rotate the music once a week.
if you need to automate transcoding, you should switch to winamp and use the ml_ipod plugin. there's a settings tab where winamp will convert on-the-fly any audio file to whatever mp3 settings you want, as it is being transferred to your ipod. it will retain all of the id3 settings from the original file, plus you won't have to worry about creating duplicate files on your computer.
winampml_ipodjust a note when installing: winamp now comes with built-in ipod support, but it's not as good as ml_ipod (which now includes support for playlists, transcoding, album art, etc). when you install winamp, choose "custom" and
uncheck "ipod support". once it's done installing, install ml_ipod separately, then head into winamp preferences to configure everything.