Yet another Mac music Question

I have an imac >transparent USB>PS audio digital link III (Cullen mods)>pre-amp. Its sounds good, not great. Here are my questions. Note, I will be purchasing amarra in the next week or so (if that needs mentioning)

I went to the audio midi set up and under the USB out it will not offer a 24bit option. it offers 48K and 16bit as the highest option. Itunes will not read a 24bit flac file even with Fluke. What am I doing wrong?

I would like to set up an external HD to store my itunes library (via firewire). I need to transfer the files that are now on various other external drives in flac format. I need to convert to AAIF and store in the new main library drive. What is the most efficient way to convert the files and link with itunes?