If you want to play the CD in a regular CD player, you'll want to burn an audio CD (this is the default for "Burn CD"). Audio CDs can hold, in general, 80 minutes of audio. The size of the compressed AAC files doesn't matter unless you're planning to burn a data CD to transfer the files to another computer (in which case you'll want to use Finder to make the CD, not iTunes
Also, converting AAC to MP3 will hurt the file's quality. I like my music to sound good, so I don't do that.