First of all, don't over-worry about what can go wrong. I added it in order to help you, not hinder or put you off. Apologies if it has - change your mind about this as soon as you can.
I've upgraded some of my albums to a higher bit rate, often changing them to mp3 at the same time. So to answer one of your questions, yes, an iTunes Library has no issues at all with mixed formats, nor do iPods. I have mp3, aac, wav (experimental use only), Apple Lossless (which is why I know they don't play on some Android players) in my Library and on my iPod. I also have some flac files, but iTunes cannot even import those, so I had to create new versions first, by using another programme.
My usual practice is to import over the existing copy. This not only protects a song's place in Playlists, but as mentioned, play counts and star ratings, both of which I make use of for Smart Playlists*. Because I made the mistake of renaming some albums, whenever I re-import one of those I have to check album titles in order to prevent creating a second copy under the original title. That's why I know what can go wrong, but also, how easy it is to sort it out. There's another benefit to copying over the top. If you re-import over the top of the existing copy, you don't have to delete the old copy. But if you delete and re-rip, that's an extra task. What a faff, why bother with that?
Try it.
As a test, just try with one album, to see how you get on. The very worst that could happen is you manage to lose both the old and the new copy (although it's difficult to see how). If that happens, simply import the CD from scratch. If less than the worst goes wrong, I've given you tips on how to fix it. To quote (ironically) a bold statement from a film (which The Simpson's nicked): "nothing can possibly go wrong". Once you see that it works, try another one.
Back to your point about file sizes: a one hour album in Apple Lossless is 60MB, so about the same as the mp3 or aac version, not the size of the CD version. But as stated, I recommend not using Apple Lossless, no matter how much you think you'll stay with Apple forever. For example, can the Brennan play Apple Lossless? (I don't know, although I am aware of their players.)
You made the point about the capacity of your nano having limited capacity. That's an easy one to solve. (Well, it involves setting up, but there's minimal maintenance once you do.)
Let's assume that you don't want to hear all the same songs every day, but instead, you would like a variety. Perhaps, songs you like a lot are available on your iPod every day, while your less favourite songs are removed form the iPod after you've heard them, and not put back onto the iPod for a while. This is achieved by Syncing with your iTunes Library. So after each Sync with iTunes, your iPod would have a sightly different selection of music on it; favourites and some music you haven't heard for a while.
Such an amazing feat is achieved by using Smart Playlists (did you notice the asterisk up above?)
* A Smart Playlist can be created which removes songs after they've been played and only puts them back after a period you choose has elapsed. The same Playlist can keep favourite songs in it all the time. You then use that Playlist to synchronise with your iPod, and it removes and adds songs as dictated by that Smart Playlist. Fret not though - you can still play the music on your iPod in any way that you currently use. For example, that favourite album can be played from beginning to end just like playing the CD. Nothing else will play. You can (if you so wish) select a particular genre and play every song (currently on your iPod) of that genre, without hearing any other genre. Or of course, you can simply set the nano to play songs in shuffle mode, choosing from every song currently on the iPod. After a further Sync, that iPod has a different selection on it, so every shuffle would be different.
Oh! and each of your iPod can be synchronised independently of the others. Your running iPod can have completely different content to your sit back and relax iPod.