Are you using Windows?

Go to LW's library, click on Saved Files then click Explore...your saved folder will open for you. This is where you have to add files from, when adding to the iTunes library. Did you try dragging from this folder & dropping into the iTunes library?

By default, the saved folder location for windows is C:\Documents and Settings\your username\Shared. Unless you've changed the saving location within LW, that's the location of your saved folder. So that's what you have to look for if you use the File > add file to library method. Once you're in iTunes, click on file > add file to library. Now browse for your saved folder & follow that path above in bold (my computer > C drive > Documents and Settings > your username > then find the folder called Shared...that's where your downloads are saved). Once you're there, click on a song > open. It should go to the iTunes library.

To make iTunes your default player, go ahead & open your saved folder (like I said in the first paragraph). Now right click a song > open with > choose program. Select iTunes from the list & then tick the box to 'always use the selected program to open files of this type' > ok. Now iTunes should be your default player.