A new feature in the latest version of iTunes will allow you to compress files on iPods and iPhones while you sync. It might increase sync times but at least you don't have to have two libraries.
i have a moderately large, highish resolution iTunes library, and tried syncing using the auto compress mentioned above.
It was painfully slow. I don't have the fastest computer (latest Mac Mini), but we are talking days to sync a 16gb iPhone.
You are better off converting all your files to 128AAC and storing them in a seperate folder, then setting up a second iTunes library which links to them.
Having multiple libraries is easy. Just hit Alt or Shift when you open iTunes and it will do it for you.
I have my main library as iTunes, and my compressed library as iTunes1. When I sync the iPhone or IPad I use iTunes1. Otherwise the big library.