OOOH! I know how to do this! I use my iTunes music on the Sim Radio, but follow these steps:
-Open iTunes
-Rollover the Tab "Edit" in the upper left corner.
-Select "Preferences"
-In "General" Settings, click the button "Import Settings" (go a bit down)
-Select "MP3 Encoder" and "Higher Quality"
-Under the "Library" tab, click "Music"
-Right Click a song and select "Create MP3 Version..."
-Wait for new version
-Once created, right+click "copy" the MP3 Version of the song and paste it into the Custom Music folder.
-Open Sims3
-Check your radio. Done!

Deleting the default songs may cause your custom radio to not work, but it worked fine for me. The KB measure doesn't matter. I have a nine minute song about 8,000KB. It's the kbps that matters.
If you need an alternate tutorial with pictures, ask me.