I have 3G ipod 20GB and Grado SR-60. There was a wide difference between 128 and 320 AAC, but I actually recently re-ripped all my discs with Exact audio copy to 192 VBR files (much smaller than 320 AAC). The difference (to my ears anyway) is at least equal to 320 AAC. Understand that this is completely my opinion. So my verdict is yes, re-rip to a better bitrate.
I'd have to disagree pretty strongly that 192 VBR MP3 (assuming you're referring to LAME w/EAC) is "at least equal to 320 AAC". IMO it's not even equal to -aps MP3, and that's about equal to 192 AAC (many say 160 AAC). I'm assuming we're talking QT/iTunes AAC. Of course if you have compatibility concerns, LAME MP3 is the way to go.
For the phones you're discussing, 192 AAC should do very nicely and 160 AAC may be good enough. You may find this comparison interesting. Note the MP3 encoder used is iTunes branched FhG-like, not LAME. I'd use it more for an AAC bitrate to bitrate comparison. And if you're curious about size comparisons, you can see this old thread for one example.
Again assuming the iPod is going to be your only player, I'd use 192 AAC as your base and move up or down depending on your needs. Quicktime is easy to use to do tests (with multiple windows), so you may find what works best. I'd definitely bump it up from 128.
I'm not even sure if 128 CBR counts as music, does it?
Yes, definitely upgrade. If you want MP3, LAME 3.90.3 --alt-preset standard, or, as blessingx will likely point out, --alt-preset fast standard for faster encoding. I know next to nothing about AAC, so I'll trust blessingx on this one.
And, of course, as Jasper pointed out, there's always lossless, if portability and hard drive space isn't an issue. I myself have all my CDs ripped into FLAC. Works marvelously.
Lossless won't work for him with the iPod, but I do agree that it is the best way to avoid re-ripping over and over again at every step of the upgrade cycle(s). I personally have FLACs and WAVs archived on various external HDDs so that I can load the iPods and Karma as quickly as possible.
As for the bitrate, I would stick with AAC at 192 or higher and/or LAME MP3 at APS or better. That will give you some upward flexibility for the future.
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