You can work around that, though. As I pointed out in #86, one way to do this is to burn the non-iTunes tracks to a CD and then rerip them into your iTunes library. It's a bit of a pain, but it does work.
Other players won't accept the AAC tracks you purchase from the iTunes store either. I honestly think that this has as much to do with the manufacturers and the music services putting in enough basic anti-piracy protection to convince the record labels to continue letting them sell digital music, as it has to do with forcing consumers to only shop at their sites.
I do it in reverse as well. I'll burn Itune's purchases to CD's and then download them to my cheapy 128mb MP3 player I use when I'm doing something active like bicycling.