I"d be much happier if Apple joined the 21st century and supported FLAC natively. I use Apple Lossless as it's so convenient. My iPod Touch likes it, my wife's 160 gb iPod Classic likes it, my son's iPod likes it, and I can control iTunes from my iPod Touch and use it around the house through my pc > stereo connection.
Haven't found a music player that supports gapless playback of FLAC that works as well in as many situations. So, I encode and archive as FLAC, but end up making ALAC copies of the stuff I really like.