When you compare MP3 to AAC you can't simply A/B test each for a minute. What you need to do is listen to a hour or more of music and make a note every time you hear an "artifact" these will happen maybe in electronic drum hits or on a synth lead. Then listen to the SAME music using AAC.
The defects in MPS are not constant over time. It will sound good for a long time then some transient will be "way bad" but last for just a faction of a second. It will sound BAD and will be easy to detect. But 99.99% of the music will sound close to the same. MP3 is mostly good but some kinds of sounds it just can't handle. Mustly it does acoustic instruments well but not so well on man-made digital stuu used in some genre. AAC will have far fewer of these transient defects.
This is not some audiophile "voodoo". The sound is obvious and sounds like a defective recording, not subtle at all. When you hear it, you will thing something is wrong like maybe power switch got bumped for millisecond or the headphone jack is loose. These MP3 defects don'r happen on every song, how many depends on the genre and your luck.
Hard disks sell for $100 per terabyte. that works out to about 3 cents per song? Is that so expensive?
OK your iPod has limited storage. So compress the files on the iPod but keep your main collection LOSSLESS.
I understand what you're saying, technically AAC is far superior as a compression format, much newer, etc.
However, my point was that MP3s are more "standard". AAC is getting there as well.
Since the OP has the Lossless sources, he/she could always go back and batch convert his library with AAC once it completely replaces MP3 or whatever comes next.
I know that even with high end audio equipment, I can definitely notice the difference enough that it would actually be better for me to stick to Lossless. However Apple doesn't support FLAC without a 3rd party APP, so I would definitely choose to convert to Apple Lossless instead so I can use it directly with iTunes and any other iOS device that doesn't have a FLAC player installed.
I am sure the OP has thought about the above. I just think that MP3 is a viable option if you don't want it to take too much space especially if you are going to dump your music into a portable player, stream it online to your devices, etc.
I still prefer MP3s, but I do have my Lossless collection (I chose Apple Lossless a while ago) that I ripped sitting on my server, which I can convert to any format and not lose quality. Even have album artwork, ID3 tags, lyrics, etc.