I don't use iTunes, so it's pretty much meaningless to me either way. Just something I thought I'd read somewhere -- maybe it's just that iPods support the FLAC codec. Hell who knows, I know that I really couldn't care less...
I'm not really sure how this comment is even relevant. Are you somehow trying to make an argument for uncompressed data? I have several uses for 1TB of harddrive space, like VMWare images, SQL databases, what seems like a million pictures from my DSLR, and of course lots of games.
You can have a perfectly lossless compression audio file (or even, if you wanted to make the argument, an uncompressed raw WAV) that still sounds like complete shit -- compression (or lack thereof) cannot make up for a poor source.
An absolutely terrible painting will look equally terrible in JPEG, PNG or BMP formats within reason. I think you need to understand the difference between source art flaws and compression flaws before you continue making these sorts of posts.