Hey Link80,
I suppose you have a 5th generation Ipod, don't you? When you speak of lossy sound formats, what exactly do you mean. Rockbox supports so many formats I can't imagine yours not being supported. Check
http://www.rockbox.org/wiki/SoundCodecs to see if your formats are supported.
You are not sure where to put your lossy format sound files? Just place them in any folder you like (just not the .rockbox folder) using drag and drop in the explorer and you should be fine. Just create a folder for music and one for videos in the root directory of your player.
I don't know floola, so I can't tell why your files aren't showing up in the original firmware. I personally use the program sharepod to transfer videos in higher quality to my iPod and watch them with the original firmware. Rockbox is also able play back videos, but they need to be in a specific format. With WinFF, the conversion is very easy, because this program comes with a Rockbox preset. See:
http://www.rockbox.org/wiki/PluginMpegplayer#How_To_Encode_FilesI hope you can sort your problems out and enjoy Rockbox.
Greetings,
c_k