Here's my situation. I am using my iMac as my transport, feeding either my DAC1 or (more frequently) my HR Balanced Desktop w/DAC. I use iTunes to manage my collection. Most of my collection is 256 AAC due to the fact that I used to do a lot of portable listening and I like to have my whole collection on my iPod. But recent meets have finally hammered into my head that it all starts with the source. So, I think I need to start reripping lossless. But here's the rub, I also want to keep the lossy rips for my iPod. So here are my questions: 
 
1) Is there a way to split up the iTunes db such that I could easily flip between my lossy and lossless collections, or do I need to keep them both together? 
 
2) My internal HD is 250 GB. How are the rest of you computer as source people storing your tunes? External HD's? 
 
3) I know that there isn't a whole lot of love here for the DAC1, but I happen to like it. That said, I'm interested in opinions about clearly superior products in the same price range. 
 
4) Any other suggestions about how to approach this project? 
 
Thanks all.