Way to pipe the output of one program into two other programs

Since you have two commands, it would be better to use:

{ make clean && make DISABLE_ID3TAG=1 CFLAGS="-O2 -DNDEBUG -W64"; } 2>&1 | myprogram

Or

( make clean && make DISABLE_ID3TAG=1 CFLAGS="-O2 -DNDEBUG -W64" ) 2>&1 | myprogram

The make clean is not directing its output to the pipe, you will want to use either of the two above to let the shell redirect the output of both make calls as one.

If I understand correctly, you want to fire up one instance flac … | lame … for each input line, and interpolate the input into the arguments to both commands.

Since you need xargs to start a pipeline, you need to make it start a program that's capable of creating pipelines, i.e. a shell.

inotifywait -m -r -q -e moved_to --format "%w%f" ~/test |
xargs -l sh -c 'flac -cd "$0" - | lame -b 320 - "/media/1tb/$0.mp3"'

Alternatively, have the calling shell read lines one by one and run the pipeline.

inotifywait -m -r -q -e moved_to --format "%w%f" ~/test |
while IFS= read -r file; do
  flac -cd "$file" - | lame -b 320 - "/media/1tb/$file.mp3"
done

Note that the format %w%f produces an absolute path, to which you're prepending /media/1tb and appending .mp3. If you want to strip off the directory part of the file in the lame command, change $file to ${file##*/}. If you want to strip off the extension, change $file to ${file%.*}. If you want to do both, you'll have to do it in two steps. If you want to reproduce the directory hierarchy under /media/1tb, you can use mkdir -p.

cd ~/test
inotifywait -m -r -q -e moved_to --format "%w%f" . |
while IFS= read -r file; do
  [ -f "$file" ] || continue; # skip directories and other special files
  dir=${file%/*}; file=${file##*/}
  mkdir -p "/media/1tb/$dir"
  flac -cd "$dir/$file" - | lame -b 320 - "/media/1tb/$dir/${file#.*}.mp3"
done