I have just installed Itunes 11.0.   When itunes creates a *.AAC file, does it put it in the same directory as where my .wav files are located?

I have an iPod Touch 64gb.  I have 149 gb of  .wav or similar format music.  I have created a music library with the latter. How can I convert this library
into  .AAC format so that the syncing process will be seamless?  Should I create a new folder for the .wav files and put the .AAC files into
a subfolder in the itunesmedia folder?  If so,  how do I get  itunes to put these files in that folder?
Thanks.

was this ever addressed

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