Both formats (mp3 and AAC) are compatible with your iPod; I'm not sure about the size difference between those two files, though.
To set up your iTunes preferences so that when you import a CD, it is automatically imported into AAC format, do this:
In iTunes, go to "Edit > Preferences > Advanced". Here, under the "Importing" tab, Select your "Import Using" setting to "AAC Encoding" instead of "MP3 Encoder", or anything else.
-Kylene