I use these settings to ensure that my blu-ray rips work on both my Android and iOS devices. If I just do iPad, those usually don't run on my Android.
Edit: Sorry, I forgot you were talking iPad 2. However, all you need to do is modify the height and width setting on the screen below if you really want 720p rather than 1080p. Note that 1080p will still work, but the files will be larger. The advantage of larger is that if you get an iPad 3, you can still use the video and get the higher resolution. I do all my rips from Blu-ray at 1080p.
Note: you can do High-profile and normal, too, but these files, IME, work on fewer devices. My objective was to get mine to work on both iPads and Android (tegra 2) tablets.