There is a much simpler way than has been discussed here.

1. Select files in podcast.
2. Go to "Get Info"
3. In Options Tab, change Media Kind to Music
(If you want it to no longer skip when shuffling, change that also, same goes for remember playback info)

The podcasts are now in your library, no need to create new an delete old files. This works for the most recent update of itunes (9), not sure about earlier versions.

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Your tip doesn't work. There is a popup menu for it, but it is grayed out. iTunes 8.2.1. I'm implementing the OP's tip, it seems to be the cleanest and best way.

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I don't think you can change Media Kind to/from Podcast prior to iTunes 9.

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