You have two options, lossless and lossy.

If you want to go the lossless route the files need to be converted to ALAC (XLD lists it as 'Apple Lossless' in its dropdown). If you don't mind going down the lossy route you'd convert the original AAC ('XLD lists it as MPEG4-AAC' in it dropdown).

Both conversions would maintain meta data and a conversion to ALAC would also maintain 100% of the audio quality. Conversion to AAC could technically mean a loss of audio quality although dependent on the bitrate you probably won't notice it. I have all my backups as FLAC but only play back AAC on my portable devices and my HiFi setup. At a quality of 90 in XLD I most certainly can't hear any difference, and most likely lowering it to 75 would have the same outcome for me.

The big question at the moment is to what format you ripped your CDs. Did you rip them to FLAC, ALAC, WAV?

You have two options, lossless and lossy.

If you want to go the lossless route the files need to be converted to ALAC (XLD lists it as 'Apple Lossless' in its dropdown). If you don't mind going down the lossy route you'd convert the original AAC ('XLD lists it as MPEG4-AAC' in it dropdown).

Both conversions would maintain meta data and a conversion to ALAC would also maintain 100% of the audio quality. Conversion to AAC could technically mean a loss of audio quality although dependent on the bitrate you probably won't notice it. I have all my backups as FLAC but only play back AAC on my portable devices and my HiFi setup. At a quality of 90 in XLD I most certainly can't hear any difference, and most likely lowering it to 75 would have the same outcome for me.

The big question at the moment is to what format you ripped your CDs. Did you rip them to FLAC, ALAC, WAV?

You ripped to FLAC, that's perfect! Just go to 'Preferences' in XLD and under 'General' you can select output format. Set that to 'MPEG-4 AAC' and click 'Option'. There I would set 'Mode' to 'True VBR', 'Encoder quality' to 'High', 'Sample Rate' to 'Auto' and 'Target quality' to '80'. Make sure 'Add gapless information for iTunes' and 'Write accurate bitrate information' are on, 'Force mono encoding' should be off. Click OK.

Back on the General tab, set 'Maximum #Threads' to the amount of logical cores your computer has. You can find this in OS X if you go to 'About this Mac', choose 'More Info' and go to 'System Report'. Under 'Hardware overview' it should say 'Total Number of Cores'. Just make sure the #Threads in XLD corresponds with that number. You can choose to have the encoded files added to iTunes straight away by ticking 'Add encoded files to iTunes if possible'.

Now you're ready to encode. You can right click on a selection of FLAC files in Finder and choose 'Open in XLD' and they will automatically by encoded to AAC files with a .m4a extension. Alternatively you could use Open from with XLD, that has the same effect.

I would advise you to convert one CD. See how that works, play the files in iTunes, on your mobile devices etc. Check if the artwork and other metadata has converted correctly. If that's all good you can convert the rest of your CDs. That's probably a job that's best to do overnight, just fill up the encoding queue, see if it's running and go to bed.