First of all, I love your software, and I recommend it to all my friends and since I'm a member of a popular iPad forum, to everyone there.
Unfortunately, I'm afraid that your iPad setting is incorrect. The iPad doesn't support DivX. It should be h.264 and the iPad supports much higher bitrates than you've chosen as a preset.
I'm wondering if you couldn't set maximum width, maximum height and maximum bitrate instead. Unfortunately, FormatFactory codes black bands in the video with the default settings - I also use (default) unless one of these is too high.
The ideal iPad video specs from the Apple site are here:
H.264, 720p, 30 frames per second, AAC-LC audio up to 160 Kbps per channel, 48kHz, stereo audio in .m4v or .mp4 at 2500kbps.
We discuss your software extensively.
Video Converting Mega-Test!
Convert Your Videos - Idiot Proof (Windows)