Lossless and lossy library

I currently have an itunes library (5,800 songs) setup with Apple lossless files. I mainly used the itunes library to feed my squeezeboxes to play music in my house.
I just purchased an 80 GB iPod and I would like for all of my music to fit on the iPod. Obviously, 5,800 lossless songs will not fit.
I want to keep my lossless library for use by my Squeezeboxes but have a separate library for use by my ipod using 192k lossy files.
I have another computer hooked up to my home network. My thought was to copy the lossless files to the other computer, import it itunes and convert to 192k. The issue I see is I will lose my playlists (correct ?) and of course maintenance of 2 libraries.
Any better suggestions will be greatly appreciated !

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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