More correctly:
- Create a new library
- Check 'Copy files to iTunes Media folder when adding to library' in preferences (on the Mac, WIndows may vary)
- Import the music from the original iTunes Library folder using File/Add to library
- You will then have two copies of the library, both containing both the lossless and lossy files, but in separate folders
Now delete the lossless ones (put 'lossless' in the search bar) in one library - this becomes your lossy library. Delete the lossy files from the other library (sort by bitrate ascending and delete the top half) - this becomes your lossless one.
Does that make sense?
Responsible for the techie bits. Has biased opinions.