Re: WMA audiobooks
My library actually advertises those as being "iPod compatible". What this actually means is that the Overdrive software has a built-in converter that will turn the downloaded WMA files into MP3 files for putting onto the iPod. But it's a horrible hassle, requires a Windows computer, and takes hours, even for a fairly short audiobook.
Re: @free.kindle.com conversion service.
Not really. ePub is not on the list of accepted file formats for conversion, though PDF is. You'd be better off downloading Amazon's Kindlegen command-line utility, which can convert directly from ePub to mobi, though you might run into some errors along the way and have to open up the ePub and fix the OPF.
One common issue is something that I see from Calibre-generated ePubs, where the dc:language field is set to UND (presumably meaning "undefined"). That will cause Kindlegen to choke and refuse to go any further until it's dealt with.