Lossless:
wav (cd) - a b c d e f g
flac & alac - abcdefg
Lossy:
mp3 - aceg
aac - bcdf
ogg - adeg
Conversions:
mp3 --> flac: aceg
mp3 --> ogg: aeg
mp3 --> aac: c
Make sense? That's tremendously oversimplified, of course, but I think it's good enough to demonstrate how digital music works. You can't replace data which was discarded as part of the compression in a lossy codec, and going from one lossy codec to another is like photocopying a photocopy; you'll end up with something worse than either.
You can use flac (and ogg vorbis, etc.) with an ipod, just
Rockbox it. This also allows you to drag & drop files onto it so you can uninstall itunes, a program I consider to be malware. At the very least it's as bloated as Rosie O'Donnel and installs numerous running processes. If you can't use rockbox for whatever reason, get ephpod or a similar 3rd party loader so you don't have to deal with itunes.
Of course there's no real reason to use flac on an ipod. I'd wager that on top of experience, an appreciation for sound quality and an album that isn't recorded like shit (like 99% of current music
)you would need a headphone setup approaching $1k and including an amp to tell the difference between 320kb lossy and flac. I would definitely recommend aac or ogg over mp3 though, they're 2nd generation codecs and sound better at a given bitrate, or sound as good at a lower bitrate, depending on whether your focus is SQ or cramming as much music as possible onto the portable.
Edit: That's not to say lossless is a bad way to go. It's fantastic for archival purposes, and you may come into money or develop a deep appreciation for quality which could see you dropping $$$ on audio equipment, in which case you'll be really glad you bothered with flac. It's not like hard drive space is very expensive anymore. But when loading your ipod you may want to use a converter like foobar2000 (bonus: foobar's also a great player) or dbpoweramp to make a lossy-encoded copy for portable use.
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