I have the same setup as Roger, but instead of the 'cool' Ruby script, I have a very messy Perl script. I really do think this is the optimum way of dealing with a mixture of FLAC and MP3.

I have a 'core' directory where all the main music goes. It can be in FLAC or MP3. Anything that can handle FLAC (XBMC, future Squeezebox etc) can read this one. My script scans through the main directory and if it finds a FLAC file will transcode it to its new lossy directory. If it finds an MP3, it just symlinks it. This new lossy directory is only MP3s and is read by Emplode, mt-daapd, and Ampache.

Been doing that for quite a few years now and still very happy with the way it works.

(EDIT) Actually if you want my Perl script just give me a shout and I'll email it to you. Be warned it is probably extremely badly written and it does rely on having filenames just right as that is how it tags the MP3s.