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Actually Live 5 converts the mp3s to wav, in version 4 you can't even see mp3s in the browser. It's not that bad though, a 60 min mix you would need about 6-700MB. I use Live 5 to record mixes from my decks, and I still need the same amount of disk space to do that. I am pretty sure most programs handle audio as .wav or some other uncompressed format, as the overhead on doing real-time effects and decompression algorithms on the fly is a waste.
I would much rather sacrifice disk space over throughput any day. Storage is really cheap these days.
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