I haven't heard of the new capability of iTunes, but it would have to use the EXACT same metadata that the LAME encoder uses for everything to work properly. If iTunes used a "similar" method that was slightly different, I don't think it could work.
On top of this, there "could" be issues with converting APE to mp3. I read about an issue similar to this on the Rockbox forums where the converstion process between certain file types and mp3 would result in the gapless metadata being lost. I can't remember if the "other" file type was APE or not, however.
All that aside, you can use Rockbox for gapless playback with iPods (
www.rockbox.org.)
On a side note, which iPods are supposedly able to do gapless playback natively? I have a fairly new iPod 60Gig (Video iPod) which does NOT do gapless playback with the native apple firmware when synching with MC. It does, however, do gapless playback when using the Rockbox firmware.
Larry