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Converting the files doesn't delete the originals, and for good reason! You can always archive your FLACs to DVD-ROMs if you want to have them, or delete the files. I backup the FLACs just for good measure and keep the Apple Lossless files on the computer.
It sounds like both you and Mike1964 keep your FLAC files on your backup drives to maintain original copies and keep compressed files on your computer. Is that correct? If I were to do that wouldn't I need to keep both sets of files on my computer in separate folders and direct the Squeezebox to one folder (FLAC) and itTunes to another (ACC or Apple Lossless)?
I don't really see the need for lossless music on the iPod, since the environment (car, work) and the headphones are typically so bad lossy works very well. However, I also had a 30gb iPod (now stolen), which means I have to use lossy compression.