I use the iTunes-LAME encoder (with LAME version 3.90.3) at --alt-preset standard. Works well for me, and gives me the flexibility should I ever desire to get a non-iPod device. They should really compile an Intel version...
I've started using the iTunes-LAME MP3 encoder as well with the setting of -V 0 --vbr-new
People have been saying it's perceptually impossible to tell apart from lossless. I'm not sure how much better it is than what I've been encoding in the past (128Kbps AAC iTunes), but I figure instead of keeping a 320Kbps AAC archive library and a 128Kbps AAC iPod library, I will just use one library.
The latest version of LAME is 3.97. You can get it here. .DMG Drag the file into the package content/resources of the iTunes-LAME script.