You should definitely do it on an ipod. I can't stand how limited ipods are in their equalizers and such.
I've done a lot of testing and I can't personally tell the difference between FLAC and properly ripped high quality mp3s. I don't use the BEST headphones, but I do use some damn good ones. If you have the storage space I would definitely rip the CDs in FLAC, but I personally would encode to mp3 for the ipod. I find it rare that people can hear the difference, and even if you could I don't think it's worth the much larger file size for a portable. That's all up to you though. I just think lossless vs lossy is blown way out proportion on portables.