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Nahh, I mean whenever I download music off Youtube to mp3 or whatever and it goes to my downloads folder, I always drag the mp3 file into iTunes under "Owner's iPod" or whatever and now it won't let me do that anymore. That might be the problem though, the "manage music manually".
When I download music (same method as you) I download my music to a folder I cleverly named "music". When the music is in that folder I go File > Add File to Library and then pick the music I want. You can also add folders. Just a heads up Itunes occasionally fucks up when the song gets added so use Audacity or something like that to convert it into a different format. I use .wav when Itunes decides to hate my .mp3's.
For Audacity just open it up, crop the dead air if there is any, and export it.