I have been ripping all CD purchases in Apple Lossless since 2003 as well as my entire collection before that. I now have over 50,000 Apple Lossless tracks. But for the iPhone, iPods, and AppleTV, I need smaller versions, so I also create AAC 256k versions of every Apple Lossless song in my library, using Smart Playlists and notations in the Notes ID3 tag of each song to keep things in order. The downside is that my library is twice as large as it needs to be and every time I edit track tags I am doing double-entry.
My library is so large that Genius won't work... it stalls before all the info gets transferred back from Apple at initialization. Also, I get severe beachball delays during iTunes editing and navigation, since iTunes writes the ENTIRE database file to disk for every change.
I welcome switching to on-the-fly encoding while syncing, even if it slows down the syncs.
Now if iTunes could jump to 64-bit multiple-core processing, I'd be even happier.