WAVs are the ideal format for use in Premiere Elements. You can convert most audio formats (such as MP3s) to WAVs with the free download Audacity, a must-have for video editors.
If you aren't going to re-sell your video and you're only going to use it for showing to friends and family small groups (or even on a site like YouTube) most music can be used without anyone being terribly concerned about licensing.
iTunes has copy protection on most of their songs block from using it in video projects. Amazon.com's does not.
There are also sites like http://Muvipix.com that offer royalty-free music that you can use in any way you want with almost no restriction.
Steve's suggestion to use/convert to PCM/WAV @ 48KHz 16-bit, is the ultimate. That is the ideal for PrE, and the Conforming (getting it prepared to edit) will be very, very quick, and you might not even be aware of that process.
For some possibilities for music & SFX, this ARTICLE lists some resources, including the Muvipix.com link.
I am also a very big fan of SmartSound (one of their modules is installed with PrE), and this ARTICLE goes into more detail.