Many of the soundtracks I download here are usually upped in lossless formats like FLAC, and while I don't mind that, I need to save space for my MP3 player, and it also tends to act up when dealing with FLAC, at least on stock firmware. What are the best recommended settings for converting the formats? I use Pazera Free Audio Extractor and tend to use the default "auto" settings, but I just wanted to double check for suggestions.

MP3@VBR-0 will save you a lot of space and retain a lot of the original quality.
The LAME encoder has updated quite a bit since the stone age.

Anything using LAME 3.99.5 is recent.
There hasn't been any major changes to the code for a stable release in some time.

There's some Alpha/Beta releases, but not ideal for archiving.