I don’t think that happened. At least not as you’re telling it. iTunes never required AAC files.
I believe that, (possibly only) in the early days, it offered to add any imported music to your library, which I think it indeed did by converting to AAC and putting in a directory structure of its choosing.
I believe that, (possibly only) in the early days, it offered to add any imported music to your library, which I think it indeed did by converting to AAC and putting in a directory structure of its choosing.