Don’t do this! Never convert from one lossy format to another, whether you’re going from 256 to 128 or 128 to 256! You will end up with an inferior copy of your song. Always, when possible, transcode from the lossless sample down to your desired bitrate.
Thusly, you should find the original CD and rip it directly into 128. Saying that, 128 is awfully bad quality - especially in AAC. May I suggest ripping it at V2 (or V4 if that’s not enough) instead? Using V2/V4, MP3’s LAME encoder will transcode your lossless CDs into MP3s whose bitrate is around ~190/~165 respectively.
However, iTunes doesn’t offer this much functionality. You should download something called XLD:
http://www.macupdate.com/app/mac/23430/x-lossless-decoder
When you open it you won’t get a window, so press command+, to get to its preferences. Set them like so:
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http://cl.ly/3aby — after setting LAME MP3, click Option: V2:
http://cl.ly/3aa0 V4:
http://cl.ly/3aNO
•
http://cl.ly/3ag5
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http://cl.ly/3aNw
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http://cl.ly/3aSQ
Important page:
http://cl.ly/3aNZ — Take care that "Read sample offset correction value” is set correctly to your CD drive - click the down next to it to make sure they match.
Now close the Preferences, insert your CD, and go to File —> Open Audio CD…
Nevertheless, if you insist on using iTunes, set one of these:
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http://cl.ly/3aZA
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http://cl.ly/3aef
Don’t use Joint Stereo normally though, it’s worse quality.