I'm not sure if everyone here has figured out there problems as of yet, but, I just upgraded to OS 10.3.5 and iTunes 4.6 (15) {not sure what thw 15 means} and had the same problem. I went to iTunes prefs, clicked on importing and changed the setting for "import using" from AAC Encoder to MP3 Encoder and it seems to be working now. Not real sure if this was the actual thing to do, being that I have no idea what AAC means, but it's working so I'm not complaining.

Hope this helps, if I'm wrong, feel free to say so. I could learn to.