I've seen older threads on this and there are ways to deal with it.

But it sure would make life easier if a option to "pass through" lossy files when converting a library.

It's really a pain to maintain 2 libraries lossy and lossless (Same Artist in 2 directories etc.)

The way I have been working around it is, I copy all MP3's to Target (with XCOPY), run ReArrange Audio so they are in the exact same places as they would be if they were converted (and reencoded).

Then I do a Batch Convert on the whole library (Flac & MP3 source) with the SAME Folder structure and target signature.

What happens is, Batch Convert will come back and ask, do you want to overwrite all the MP3's and I say no to all.

A suggestion on implementing such a feature would be if the target format matches the source format just copy the file rather than decode/encode (disregard bitrate).
Some albums you just can't find CD's or Flac and your stuck with MP3. And it's still more practical to use high bitrate MP3's in many applications (phone / car).