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Yes, iTunes can convert unprotected WMA files to MP3. But it does not convert protected WMA files like library audiobooks, which are what the original poster was asking about. Library audiobooks come in either protected WMA or (unprotected) MP3 formats (in a ratio of about 5:1 or so, depending on your library). None are unprotected WMA files.
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With the later versions of Overdrive Console, or Net Library (these are the library audio book equivalents of ADE) and an approved device (I use my iTouch) you will be able to access library WMA audio books. I use them all the time...but as I mentioned, be prepared to start the transfer and go and do something else for an hour. It takes forever.
The iTouch does do ebooks as well, but don't think I would recommend the small 3" screen for ebooks even though my husband doesn't mind it.
cheers