Using the mini on your TV involves a little work getting it setup, the ATV just works. The mini has more options, of course, but for a just plug it in and go the ATV can't be beat. I'd say use the ATV for awhile and if you decide to get another one look at a mini then and see if you'd use the extra features.
If you have an ATV and there's even a chance of you having 5.1 hooked up to it in the next 4 years or so, I'd rip with the AC3 track, personally. It adds about 3mb per minute to the file, so ~300mb per file, not HUGE.
As for rip settings, I use a custom setting for my ATV and iPod touch (and hopefully decent forward and sideways compatibility). I use a 64% CRQ h264 encode with some advanced flag set. I use the maximum non-anamorphic resolution for the movie. I also use a weak denoise filter which helps lower the overall size of the file and can add a slight improved perceived image on some older or poorly transferred films. For audio, I do keep the AC3 track and also a 160kbps AAC DPLII track with 1.50 dynamic range settings (helps keep the voice track clear on stereo setups, imo).
The result plays on my ATV, looks DVD quality on my 30" HDTV from my normal 8-9' viewing distance. It plays fine on my iPod touch and, of course, looks fantastic there. It looks lower than DVD quality on my iMac, as it's a very high res display and you are sitting very close to it. That said, it's about as good as non-HD iTunes downloads. Because I use CRQ the file size varies quite a bit, but I average about 1.5gb per movie (including the AC3 soundtrack). I've had some shorter movies that happen to compress well for whatever reasons go down as far as 900mb, and some longer movies that don't compress as well up to 2.5gb. But, 1.5gb is pretty typical.
I've ripped about 100 movies this way, so far, and 40 or 50 episodes of TV shows. I'm quite happy with the compromise of space vs. quality and haven't felt the need to tweak anything in my settings since I started using this custom preset. The encode time is decent as well. On my 2.4ghz C2D iMac I'm averaging just below realtime encoding (it's single pass since it's CRQ, plus a fast scanning pass for subtitles, but I don't know if that's used for the video encoding at all). Some are a little over realtime, some are ~60% realtime, but I'm very close to realtime, maybe 92% realtime speed, when you average all the movies I've ripped together.
Hope that helps. If you want the exact settings I use send me a PM to remind me to check it when I get home from work.
Rob
