Why are you posting in the mac section if your questions are about windows? On mac, go to iTunes Preferences>Advanced & tick both 1st 2 options about organisation & Copy to iTunes Music folder when adding to library. Do the same for Windows iTunes except the Preferences are found under the Edit menu.

For Windows LW will not copy the songs directly to iTunes so to get the songs into iTunes see: http://www.gnutellaforums.com/showth...threadid=36230

Only when you add uncompressed music such as wav or aiff or songs from a CD to iTunes will it encode them!!! BUT you need to tell it to 1st: iTunes menu>Advanced>Convert selection to... So that's when the importing options of encoding make a difference.

Normally when you add a song to iTunes, iTunes will copy the song to its own music folder. See the images here for an example of what I mean: Albumwrap/iTunes ie: iTunes will organise them into artist & albums.