Thank you so much!
I had already given up hope
I'm guessing you mean this step:
In iTunes Preferences|Advanced, uncheck Copy files to iTunes Media folder when adding to library. This tells iTunes to use calibre's copies of your books.
But if I do that, my music will not get copied into the iTunes once I play it, which is what I like it to do.
I guess I can't have it both ways, can I? Either it copies stuff or it doesn't. No way to teach it to handle different file extensions differently?