I don't know if it's something new to iTunes 8, but as it turns out the shrunken iTunes player does indeed now get quite a bit smaller than earlier versions did. This, coupled with knowing the trick to make any application window sticky across multiple Spaces, solves your problem neatly without having to get any additional apps or widgets on your system. Apple to the rescue! :-)

Let me step you through how I figured out how to do this and you'll be able to follow along on your own Mac system. For this, I am using my Macbook Air, but it'll work on any Mac, of course, from a fancy big-screen iMac to a humble iBook or Macbook.

First, launch iTunes, which you're already used to seeing with its big, glorious face:

You probably already know that if you click on the little red bubble on the top left you'll close the window (but not quit the app, an interface error that's much more pervasive in Windows), and that the yellow bubble minimizes the app, making a thumbnail version of it appear on the Dock.

That's not what we want to do. Instead, click on the green bubble, and poof, you get the mini-iTunes window:

Nice, but still a bit big. So grab the drag corner on the lower right and move it just a bit towards the left. This is where we start to see new behavior:

Nice! It shrinks. Now, keep moving it further, and, voila! The micro window:

That's perfect, a tiny window with just the essential controls of next, previous, play/pause, and volume.

Now, let's make that little window sticky across all the different Spaces you might be using. This is done by choosing Apple --> System Preferences. The top row will show what you want:

Click on "Exposé & Spaces" and you'll get a fairly complicated window. What you want to do, however, is click the little "+" button near the lower left corner. You'll see a list of all the apps you currently have running:

Choose iTunes, which then shows up in the Applications area with the name of the current Space. Click on that Space and you'll find a pop-up menu:

As I have done here, choose "Every Space". Close the Preferences window.

Done!

Now your tiny little iTunes window will stay put even as you move from Space to Space. Trés cool, eh?