I THINK this is how you do it:

Go to Edit -> Options -> Advanced tab -> Importing tab

Make sure the "Import Using" option is set to mp3, and set your quality setting as well (192 kb/s should be the BARE MINIMUM, but that's only if you're crazy obsessed with quality like me).

Find the track you want to convert in your library, right click and there should be a 'convert selection to mp3' option.

I think that's how its done. It's been awhile since I had to set mine up to convert, but I think that's how I did it.

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