that is bullcrap ipod accepts every mp3 file, besides microsoft DRM content (usualy WMA and not Mp3).
you can also use your ipod with winamp. you dont have to use itunes!
ipods accepts: AAC, MP3 and AAC-DRM files. if you have other files, itunes converts them to AAC for you. very easy! i have about 20.000 mp3's from the net and every single one worked fine on my ipod!
that is not correct ipod does NOT play WMA (windows media audio) files. they have to be transcoded into another format (itunes usualy does this). speaking of transcoding, you can transcode EVERY audio file into a different format (besides DRM protected files maybe)
btw. www.allofmp3.com is the source i use for my audio files. it lets me pic codec and bitrate. and it's not expensive either (about 5cents per song)