Itunes normally use this file mask screme. if I remember correct:
Artist/Album/Track - Title.M4a.
For the compilations, it use a sub folder for that.
If it does, you can use software to tag your files based on the filenames, example like ID3-TagIt (dont do that on compilations, because it use a extra subfolder(s).
And for the other thing about convertning: Quality is worser when you convert a lossy format to a other lossy format, so it no point really to do that. It simply because it have compressed twice.... Beaware about that. I do not have seen software that play drm (M4p if I remember correct here) effected files.