Ok. Just did some tests with iTunes 4.6 on my Powerbook:

My purchased music burned fine when iTunes was set to "Audio CD".
When set to "MP3 CD", it gave an error of "None of the items in the playlist can be burned to disc."
When set to "Data CD", it created a CD full of folders for Artist and Album, then inside sat my .m4p Fairplay version 1 and 2 protected AAC music files.

There is a tool out now called Hymn that can strip the DRM off the files, but leave the user id information on who bought the track. It's not clear if that is enough to avoid the DMCA, but Apple is still trying to fight it by changing iTunes. 4.6 does not play files decrypted using Hymn, until a patch is applied to Hymn.

Elliminating the DRM leaves the big hurdle. To play the file, you need a system capable of playing an MPEG 4 Audio file (AAC). Thus far, the iPod is the only portable to do this with a hard drive, and a handful of flash files.

However, if you do want to listen to your music with no degration from reencoding it to MP3, you could decrypt the song and transcode it to FLAC for the Karma.