If you have a Nvidia video card get "Badaboom" from their web sight. Its pretty cheap.
I just bought Avatar for the family. I went to Fastest DVD Copy Software | Best DVD Decrypter from DVDFab and downloaded "DVDFAB PassKey 7", or google "dvd43free". These are both free and remove the encryption so I can rip my movie. Install Dvd43free or PassKey and a dvd. Then using Badaboom, which works with Nvidia video cards to transcode video fast, I transcoded Avatar in less than one hour and am now watching it on my Droid.
The settings I used on Badaboom are:
Select "Costom Media Center" on the right, select the drive your movie is in on the left.
Click Advanced, top right.
Video Decoder tab: check mark all
Video encoder tab: Profile=baseline Key frame mode=fixed
Level =Auto Interval =80
Move the slider to Highest Quality
Pic Tab: Display Res=720x480
Aspect R.= Fill to Aspect(this is important)
Output Res. will read=720x404
Film-mode=Auto And checkmark "Deinterlace"
Audio Set. tab: Audio mix=Stereo Downmix
Audio Channel= English(D.D.)6ch
Audio Bitrate slider= far left 128
These setting may also help if you are using some other transcode program such as Handbrake or Super, which are free.
This has worked very well for me every time. I have a bunch of movies transcoded and tested.