Create a folder under /Music for iPod conversions (/Music/iPod for example)
Go to Tools / Options / Handheld / Add device...
Set "Device name:" to something like "iPod Transfer"
Set "Device path:" to /Music/iPod Transfer
Set Conversion / Audio / Mode to "Specified output"
Set Conversion / Audio / Encoder to MP3
From now on, whenever you want to convert your library files for transfer to the iPod, just select "Sync Handheld" in lower left Media Center action window. Select your newly created device. Then drag the desired tracks to the "drop here" symbol and click "Transfer". The files will be converted and sent to your folder. Then you can use iTunes to transfer to the iPod.