Can you maintain both lossless and lossy versions of a library?

I want to rip my entire CD collection losslessly to a large external drive for listening in my living room (streaming via an Airport Express). But I also want to down sample the entire library to 160kbs for storing on my iPod. Can iTunes support both versions simultaneously? If so, is there an easy way to get it to down sample every song in my library to 160 kbs?
Is Apple Lossless the only lossless format that will work?
Would it be better to use some software other than iTunes for managing a music library like this?
Thanks.

Yes, you can definitely do this, although it's a bit complicated with iTunes.
You would need to keep a watchful eye over your import settings (in Edit > Preferences > Advanced > Importing) so that you know when you're going to be creating Apple Lossless files as opposed to AAC files, using the settings you desire.
Also, it would be helpful to display the Kind colum in your iTunes library window so you can easily distinguish between Apple Lossless and AAC versions of your songs. You can do this by going to View > View Options and checking the Kind box.
Then you can do some kind of sorting based on file types, etc. Additionally, you may want to create a specific playlist (this could even be a Smart Playlist based on file type/kind) for your lossy AAC files, for example. Then when you connect your iPod, you can manually select that playlist as the one you want to sync with the iPod. At the same time, your main (visible) iTunes library would display only the Apple Lossless versions of your songs for your usual listening and streaming via AirTunes.
Just to be thorough, since I haven't mentioned it yet, you can convert your Apple Lossless files to AAC by selecting all the Apple Lossless files, setting your encoder to AAC with the desired settings (as described above), and using the Advanced > Convert Selection to AAC menu.

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