1. It's a replacement for the original firmware.
2. If it's not listed, it's not supported. You're welcome to read the stickies in the New Ports forum and start work on the Nitrus, however.
You cannot convert lossy files to FLAC and expect a quality increase. If you want your music in FLAC, you'll want to re-rip your entire collection. (After having done so, you can easily convert from FLAC to mp3 for your portable players).