Converting Music from MP3 to AAC

The burning question is why? Converting from one lossy format to another will only degrade the quality of the music. iTunes can downsample songs as it is loading them on to the iPod touch so you don't need to make your own smaller copies. If you want to maximise storage space why are you duplicating your library? And, yes you will still have the option to downsample where appropriate, iTunes isn't going to inspect your entire library to determine if there are any files worth shrinking before displaying that option.

tt2

I don't know for certain, but I suspect you might find that if you make sure the album art is embedded that the converted tracks should have art. (All my files have embedded art but I don't use that feature and haven't time to test it right now.)

If you've already downsampled then there is no need to convert it a second time when adding to the device, however I would experiment with trying to get the system to work as it is supposed to. With two libraries you lose all the benefits of syncing ratings, play counts etc. and you are creating more work for yourself every time you add a new album to your two libraries.

I have a script called CreateFolderArt which will embed artwork into selected tracks. See what happens if you remove a problem album from the device, embed its artwork, then try adding it back again.

tt2