I'm trying to encode CDs at AAC 160 VBR via ITunes, but my are coming out as a fixed 160. Why is this and what am I doing wrong. I have checked the VBR box in Itunes....

iTunes doesn't show the true bitrate for VBR recorded stuff it's ripped itself. You can open the .m4a in QuickTime player to see the true bitrate. Rest assured the files are VBR.

If you really want to "see" the bitrate changing during playback, play the file in foobar, and enjoy the fluctuating bitrate shown.

As others have said, iTunes won't display (VBR) with AAC files as it does with VBR mp3 files. For example, iTunes will list a VBR mp3 as having a bitrate of 223kbps (vbr) while a VBR AAC file will just have a bitrate of 160kbps. iTunes does this with the Nero AAC encoder as well. It will report the bitrate as being 177kbps or something along the lines. I wonder when Apple will give iTunes the option for truly identifying VBR encoded AAC files.