Well I guess you win.

I have a similar setup with about 17,000+ tracks of Apple Lossless. Like you, I have also ripped everything twice (again in 256K AAC). Unlike you, it's still manageable enough so that Genius works and performance is tolerable. I use Smart Playlists to keep track of it all but I haven't needed to resort to using the Notes ID3 tags of the songs. It took a while but I finally got a Smart Playlist that includes Lossless files, 128K AACs that don't have a corresponding Lossless file, older MP3 files, and any marked "Protected" or "Purchased".
I welcome the ability to transcode any portable device (iPad/iPhone/iPod) on the fly but it would have to slow down the initial sync process quite a bit, much like doing it for photos. The other problem I could see is that it would be impossible to gauge how many songs would truly fit on your device since you'd be transcoding everything.
But one thing about the current "rip twice" system that I wouldn't mind seeing end is the problem with the Genius feature. Well, not your problem of you having too many songs that it breaks it entirely. But right now when Genius makes a playlist, it doesn't care if the song comes from the Lossless list or the AAC list...it just picks whatever it finds first. When you sync a Genius list to your iPod, you end up with a mix of the AAC files you want combined with huge Lossless files you don't. And vice-versa for playing the files at home on your expensive stereo system.
As far as 64-bit multi-cored goodness, I'm sure a rewrite has been underway for awhile. But iTunes is probably one of the more complex rewrites to do primarily because of it's interface to the massive ERP system that is the iTunes store, not to mention whatever method they choose to replace the current iTunes database system. We'll see it when it's ready.