The difference in sound quality between 128Kbs and Apple Lossless (around 800-1100Kbps depending on the source) is huge, then again so is the size in GBs. You have to have some good (read:expensive) earphones to notice it. If you are using cheap earphones, especially Apples bundled earphones, then it is a waste.
My iPhone 4 playlist has 359 songs. In Apple Lossless that's 9.82GB but in 256Kbps its around 4.5GB. I listen to Lossless music personally.
I assume your music is around 256kbps? Thats a good medium between file size and sound quality in my opinion. 128Kbps just sounds too tinny.