I'd recommend the following test:
1. Find a file you want to convert, that is in a playlist. Play it to make sure it plays.
2. Copy that file somewhere outside of MC as a backup.
3. Convert that file to your new format, using "replace original file on disk and in library".
4. When conversion complete, verify that the old file is gone and the new file is there.
5. Play that file from your playlist to make sure it plays.
If that works, I think you can be fairly certain of your process. If it doesn't, you have a backup from #2 above.
Good luck.
Brian.