I just got an Apple TV myself about a month ago, and was curious about how to convert my DVD collection (200 or so) to files for the Apple TV. After much reading, I have come up with a process that I feel is pretty good. In case it benefits anyone or answers any questions, I will go through it here.
First, I have 3 computers doing this - my Core Duo iMac, my wife's C2D MacBook, and my work MBP. I tried using my G4 Powerbook, and honestly it ripped with MTR faster than any of the other 3 computers. But, with USB 1.0 it took about 2 hours to copy the 7GB DVD video folder to external. Every day after work I try to get a few movies ripped so they can encode overnight. Using Mac the Ripper 3, I rip about 6 movies to my iMac, 6 to my wife's computer, and 3 or 4 to the MBP. I then start Handbrake, use the Apple TV preset, turn on 2 pass and Turbo first pass, I start the encoding process.
My iMac takes right at 3 hours for each movie, so about 18 hours for the 6 I started. My wife's MacBook is faster, and might finish those 6 in about 14 hours. I only start 3 on my MBP because I want to make sure it is done by morning so I can close the lid and take it to work. Sometimes I wake up to find that Handbrake unexpectedly closed at some point during the night. It actually is pretty common. With all 3 computers encoding, it doesn't surprise me anymore if one of the 3 crashed after encoding one or two. After finding how far it made it, I just set Handbrake up again to pick up where it left off.
If I am encoding TV shows I need to make sure to turn on Deinterlace -> Slower. This adds A LOT of time to the encoding. After the encoding process, I tag the files using MetaX. I have also had to use Lostify for some TV shows that I couldn't get tagged right with MetaX.
I delete the DVD Video folders from MTR after encoding. I see no need to keep them around. If I want to make a backup DVD of something for my own archival, I can use Roxio's Popcorn on the DVD Video folder before deleting it.
If I want to put a movie on my iPod touch, I will put the original DVD back in and use Instant Handbrake to make that file on an as needed basis. ATV quality is my #1 concern. I feel that this process is practically DVD quality.
All of my movie are stored on external hard drives attached to my iMac. All content is streamed to the ATV.
This process is slow. Even with three computers going most of the time, it has still taken me several weeks to get where I am now, and I might be 70% finished with my collection. Between the time it takes for the processes to run and the fairly common Handbrake crashes, I might be averaging 7 or 8 movies a day. I still have several TV show season sets to do, and they take forever. I figure one 42 minute show takes as long to encode with deinterlace turned on as a full 2 hour movie. 22 episodes per season - I would guess between MTR, Handbrake, and tagging - about 3 hours per episode. 66 hours per season.
Hopefully this helps answer some questions. I know I read a ton of threads when I was getting ready to start doing this, and I think a post like this would have helped me tremendously.