I cant tell you how but their is a way to decode the iTunes AAC files to mp3 without wasting a CD. Search Yahoo or Google.
You can use iTunes to encode to mp3s but it will cost you a CD. iTunes will only burn its encrypted AAC files to mp3 on CDs.
I've tried the software from 40th.com and it will not play encrypted AAC files. iTunes stores the DRM keys for those song files on your computer and will not transfer them to another device (except an iPod). There are ways around the encrypted AAC but again, they are "illegal" (according to Apple) and cannot be discussed here. Though you can take a look at 40th Floor's FAQ here
http://iplay.40th.com/faq.html and scroll down about half way.
Betaplayer will also not play encrypted iTunes AAC files.
Thats as much help as you are probably going to find here. Sorry.