I do get long-winded from time to time, and I apologize for that. Yes, you are correct that Handbrake is a very nice solution (for both Windows and Mac) to encode your videos to a very nice quality file appropriate for your Droid.
Personally, I love Act 1 Video Player, as it provides a nice playback setting for the videos themselves.
If anyone is interested, I can post some custom Handbrake settings that will work for both iPod and Droid viewing, and is designed to max out the quality to an almost insane level. (This, of course, is at the expense of a larger file size, and again, at that screen size, it is subjective to whether or not the eye will notice the difference.)
Handbrake + Act 1 = a great combo for me!
On a side and alternate note, the developers of CorePlayer are indeed working on Android support in the near future... hopefully. This will open up MUCH more flexible file types and codecs able to be played by the Droid. Unfortunately, they are waiting for the SDK for Android to open up some "holes" (for lack of a better term) so it can be universal for all Android devices. Until that happens, native support for most ".avi" files will not be available.... (There are workarounds, but none that work superbly well, that I've found.)