Yeah, I use Markable and it changes them to m4b. I like to play faster, so wouldn't want to loose that ability. The newer iPod does a much better job of playing faster than the old one by the way.
Seems like a pain to set up a separate playlist for every book.
Are you making your own audiobooks from cd's? Do you leave each track separately?
Looks like the new way for the iPod would work better if the book files were each in one monster file. I never trusted my 5G to remember the position of the track and it would be difficult to find your place back in one big file, but the 6G seems better about it, only loosing place once, and I think I bumped the button.