I use a few different strategies, depending on the resolution of the source content. Typically, I will choose the "iPhone and iPod Touch" as my starting point. If the content was Standard Definition, then I don't mess with the picture settings. If it was HD (I rip my Blu rays) then I go to the picture settings and the select loose anamorphic. I then drop it down so the top number is 1024 (the bottom number will adjust itself).
There are a couple of things that I do that seem to get really great conversions. I choose the size that I want for the file to be, which for a 2 hour film is usually about 1 to 1.5 gig. Then I select two-pass recording and turbo first pass. You could also as an alternative choose the average bit rate. For me, I usually end up with a bit rate in the 1300 to 1500 range using the above method. Resulting files play nicely in both iTunes and on the iPad, but of course don't play on the iPhone.
That is one other thing to consider. If you are only going to play on the iPad then go for the 1024 for HD sources, but you won't be able to play them on iPod or iPhone. If you have any need for that, just use the default iPhone settings.
And just remember to think about the relationship between your source and the output. I hear about people ripping SD to 1024 for the iPad and chuckle because you can't add material that is not there.
