Personally I use Handbrake and I honestly kind of hate doing it since all my movies are originally ripped in AC3 for my home Linux based media machine running XBMC, but now I have to convert them from Xvid to MP4 ACC.
Anyways I normally convert to the highest resolution of what my files are unless of course I can't for some odd reason since DVD's honestly aren't the highest quality. I have several that are blue ray rips exceeding obviously what the iPad can play so I've been ripping them lower because my wife likes to watch a flick or two on the iTouch when we travel. So I've been setting handbrake to maintane the aspect ratio and I've been setting it at 960x* and as well setting the audio to 2ch ACC 160kbs. For me it takes way to long since I can normally rip a DVD to an ISO format, but since these are a bit pickier I have to do it the Mac way.