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FLAC is a good format although for lossless compression I favor Monkey Audio (*.APE) and transcode for the Creative Zen mp3 player. While I am not a fan of audio books, I am a big fan of Old Time Radio (OTR) and have thousands of hours of classic shows. (Yes, even an almost complete run of both Philo Vance and The Goon Show.)
Like Harry, almost all of them are encoded as 64k mono and sound great (given the age of the original recordings and the technical limitations of period for transcribing from AM radio.)
All that said, I do not keep any audio on the Sony Reader. It is great for books and the mp3 player is great for audio. I would rather carry two devices than comprimise the strengths of either.
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