I use both (MP3 and MP4) in my ipod and can't tell which is which unless I'm on the computer and can see the file. The files are definately smaller but I haven't got round to changing my MP3's to MP4's yet as I still haven't run out of space (mines a 60Gb).
If you have the space on your computer you could keep the original track as am MP3 and then convert them to MP4 for use wth your shuffle, if you don't like it, you can go back to the original tracks.