josh, the iTunes music store, together with most of the other legal music stores, send you music files complete with their own DRM encryption. this is a restriction. For example you are limited to the number of devices you can play the file on.
shouldn't you just be able to download an unrestricted version to begin with, without messing about burning it to an audio disc? by doing that you will technically be sacrificing some of the quality too (though this may not be too noticible). Apple's DRM is their FairPlay system. this will only play on their iPod. Other stores use Microsoft's cometing Plays For Sure DRM, which unsurprisingly is not compatible with the iPod (or indeed other devices that don't pay Microsoft a license for the Pays For Sure technology).
I agree the system is very well polished, and works very easily (as many have come to expect from Apple). But that doesn't stop it from being restricted.