I bought an ipod a few months ago and I love it (and yes I'm a PC user). I share your pain on the problem of iTunes not having what you want, because they rarely have anything I listen to either. I've only gotten songs from them when Pepsi was running the free song promotion. Other than that, the songs on my ipod are all from my CDs, but I do use iTunes to manage them (you really don't have much choice on software to manage with an iPod.) iTunes does handle the backup on your machine and the transfer to the iPod itself.

If you're interested in the ipod, they just released the fourth generation, and the prices are way down on those, plus, all the leftover 3G ones are over on overstock.com for pretty cheap too.