Doubt it, I don't see how transcoding would let them imitate and bypass Apple's Fairplay DRM, that would only help in the other direction (ie - letting you play Apple music store content on a non-Apple player). Since the ipod OWNS the market the holy grail is to do the opposite, tap into that wide customer base of iPod users and let them play (and pay for) content from non-Apple stores.
Apparently, they think they've figured out a way to do this. I'd think Apple could bypass this relatively easily by making some changes in the Fairplay DRM that would break Real's solution, but the question is could Apple do it without also losing compatibility with the millions of itunes songs already out there?
Anyway, I think Real better be ready for an assault from Apple's legal dept.