QUOTE(meinthai @ Jun 7 2007, 01:29)

I'm using iTunes on a Mac to convert my music ...
If you're on a Mac, you basically have two choices: iTunes or
Max from Stephen Booth.
Max extends your options somewhat, since it will also allow you to encode into FLAC and LAME MP3.
Uncompressed -- Uncompressed is only necessary for actually editing the audio data itself, which you probably don;t want to do. Otherwise, it's pointless, since losless formats really are lossless: all the information is there; it's just compressed (rather like a zipped Word document).
Lossless -- If you want lossless, FLAC may be an attractive alternative, because there's wide support across every OS you might be likely to use. It's becoming something of a
de facto standard for lossless. However, on OS X--currently--you would need a third party player to play it back, such as
Play. That's an interesting program (with some nice features in the pipeline) but in its early days yet. I guess here you'd need to make make a format choice based on whether you'd prefer a perhaps slightly more future-proof format versus a more mature and full-featured player.
Lossy -- the CoreAudio AAC encoder in general gives better results than MP3 as you noted. But the LAME MP3 encoder (which Max uses) is very good--comparable to AAC. So either AAC or LAME Mp3 would be fine. AAC is MP3's successor, so I suppose it's slightly more future-proof but currently not as widely supported across platforms/devices. Again, it's a toss-up based on what devices you have or what player/s you want to use.
Bitrates -- There will be people here who'll tell you to do listening tests to determine whether or not you can hear a difference. Done properly that's an involved process; also I don't know of any software on the Mac it's easily done with. Frankly, I tend to go with the defaults. With LAME MP3 you'd just set the encoder to "Transparent" and it will give the material what the engineers who developed the encoder consider an appropriate bitrate for it. That varies, because it's meant to, but will be around 190kbps.
The iTunes encoder defaults to 128kbps, but that's probably because they've chosen a setting optimized for the iPod--and in the days when those had smaller drives at that. The Nero AAC encoder for Windows defaults to a quality setting that's equivalent to 160-170kbps, and that's what I'd use for iTunes, too. Just set the bitrate to 160kbps and check the VBR box, so that the encoder will use a slighty higher bitrate where it determines it needs it.
Personally, I would be happy to use either 160kbps VBR AAC iTunes or MP3 encoded at the "Transparent" (190kbps) setting in Max. If you do hear deficiences, you can encode at higher bitrates/quality levels and see whether those are gone. I wouldn't use very high bitrates like 320kbps with a lossy codec myself, because those codecs are intended to give you a lot of bang for your buck and not waste space. And if space is not a problem, one might as well use lossless as use very high bitrate lossy.
Caveat: You say resident experts. I'm anything but an expert; these are amateur observations.