I would definitely re-encode for the iPod. The Digital to Analog converter in the iPod certainly isn't good enough for you to be able to tell the difference between a lossless file and a well encoded MP3 or AAC file. You'd essentially just be wasting space on your portable device. MC has a very nice on-the-fly handheld conversion option which will automatically convert from your lossless source format to whatever format you want as part of the sync process. It can also cache the converted files so that it only needs to do it once per file.
For my Sansa, I have caching enabled (with the
limit cache size option set to about double the storage capacity of my device) and it works great.
For the format to store on your RAID, I'd probably go with FLAC if you want to go lossless. APE would be a fairly good option as well, but they are less portable (there are no readers available for non-windows platforms) and less widespread. Now that MC includes the built-in FLAC plugins, I don't see any reason not to just use that format, which seems to be well accepted on "the scene".
I too would strongly consider just using a very high quality LAME MP3 rip though. You save so much drive space, and with LAME set to VBR Preset Fast Extreme it is going to be completely indistinguishable from the lossless version, even on very high-quality audiophile gear, unless you have magical ears or except for certain very rare cases. If you really don't want to worry, LAME preset insane (which is CBR 320) is the absolute best possible option for MP3 compression.
If you do decide to go with a lossless format for archival purposes, I'd just set MC to convert them to LAME VBR Preset Fast Medium (V4), or use MC's preset High-Quality Portable (which is either V4 or V5, I don't remember anymore) for the iPod and call it good.
If you really want to use lossless with the iPod, your
only option is Apple Lossless in a M4A file (ALAC), and that is difficult to encode with MC. I think you can do it by using iTunes as an external encoder, but I've never set it up. Try searching for more details. Again, I would probably recommend against this. With the circuitry in the iPod, it is really just a waste of space. The only downside to the conversion is the extra time it takes for the sync, but with MC's caching (as long as you have the hard drive space to throw at it) this is minimized substantially.
Hydrogenaudio has a very good Lossless codec comparison guide here:
http://wiki.hydrogenaudio.org/index.php?title=Lossless_comparison