I'm sure you can get itunes to re-encode but I'm at work so cannot double check. I say re-encode. You'll actually be left with 2 files, the original and the smaller 128kbps version.
I think its edit > preferences > advanced > select the 'importing' tab > use the 'setting' drop down option to select the 128kbps option. Don't forget to set to MP3 as the default is ACC. Then just import the file.
Sort of allows batch processing too if you add all the MP3s to be re-encoded to a folder and import the folder to the library.