Personally I think that memo has been leaked to deter people from calling applecare and requesting a free bumper. After calling them, they agreed to send me one.
Heres the confirmation email which has been edited to stop that advisor from getting into trouble.

I've got the same version as you and everyone else with either an iphone for or an older iphone running ios4.

I'm running on a Windows XP laptop and the option is just not there at all in either right click or advance menus. The create MP3 option is there, the create AAC option is simply not there at all. I'm pretty good with setting up this sort of thing and getting it working, but there does not seem to be a way to do this AAC option. I've tried going into the preferences menu and trying to look at the settings to see if anything is missing or not ticked in there.

I'm pretty much decided that the option must have been removed. I've tried on imported cds, downloaded tracks and tracks downloaded through itunes.

Sounds like they are being auto converted to aac. Check Preferences>General>Import Settings>Import Using>MP3 Encoder

As the above post says it will only give the option to convert to the format you have selected in your import options

Thanks for all your help.

I went with the iringer option in the end as it means I don't have to mess around with any iTunes settings or renaming of files. Got it all set up and running on my phone in just a few minutes.

I'm contented once again to hear gay bar again on the rare occasion someone calls me