No question 256 will give better sound, with the obvious tradeoff of halving the capacity. 128K is probably satisfactory for the car. A better solution than multiple bitrate libraries, IMO, is to simply get a bigger ipod and just stick with the lossless files. A 120GB (current) Classic would store probably 250-300 CDs at that rate. (if you can find one of the recently discontinued 160GB models, probably 350-400.) Since you encoded to Apple Lossless already, you would save an immense amount of time and tedium transcoding, as the ALAC files will play on the iPod as is. (How much is your time worth to you?) Alternatively, a 16GB Nano would give the same playing time capacity as your 8GB, assuming encoding at double the bitrate.