Regarding MP3 playback versus AAC playback on the iPod Touch; I understand that AAC is pretty much the preferred format that Apple is pushing at the moment but how does MP3 Playback compare to AAC playback when it comes to:

1) Battery Life
2) Audio Quality

Mainly asking because I am going to order an iPod Touch 64GB and wondering whether there is a difference between the two when using iPod Touch; there were reports (not too sure how reliable) that mp3 didn't sound as good and battery power was chewed up more.

take a look here

http://www.apple.com/quicktime/technologies/aac/

i personally have an ipod touch 32 gb 2g and use only AAC,working great so far,battery lasts a lot for me and audio quality is good (AAC true vbr Q127 i generally use).

I'm running Snow Leopard so when do use XLD I find that when I set it to 127, some of the music ends up being over 320K - I've since pushed the Q back to 110 which has solved the problem. Have you seen that occur?

yes that's the encoder doing its job at the new Q127

Ah, ok; my understanding is because it is above 320K, it won't work on the iPod - or am I confused? I've decided on using 100 which has kept it below 320K.

iPods and iTunes can playback AAC files at a bitrate above 320kbps despite what Apple's tech specs say. There was a time (back in the 3G iPod days, over 6 years ago) that playing back mp3 files would yield better battery life due to lower processor power consumption but that changed with the 4G iPod (released in 2004) and every subsequent iPod after that. No need to worry about increased processor power consumption on iPods anymore as their hardware has been more than optimized for AAC and mp3 playback.

Also, I suggest that you conduct a few listening tests to determine the VBR AAC setting that you need for transparency. I think there are a couple of Java based ABX programs that run on Mac OS X.