The newest HandBrake has presets for AppleTV. I created some for myself too. I have three for widescreen movies and TV shows and three for 4:3 movies and TV shows at 1000, 1500 and 2000 respectively.
I usually rip at 2000 unless the DVD is so badly encoded that I can get by squeezing it into only 1000 or 1500. If I feel the DVD is so good and tests (I make small snippets of the video before I finalize the better DVD's) I might make it higher KBPs.
So far the only DVD I really needed to rip at a higher bitrate is The Wizard of Oz. I ripped it at 5000KBPs. That's 5MB per second. It produced a file of 3.67GB for a 1:41 long movie. And it looks magnificent. 2000 didn't look all that hot. So it was worth it just for this awesome movie. (After all, the DVD video itself actually weighs in at 19MB per second and I paid $40 for the 3-disc set. I deserve to get as much quality as I can.) I watched it both on a DVD player with scaling and the newly ripped file on my AppleTV and there's no difference. If only I could afford to rip every DVD in my collection at 5000. (The max supported by
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TV.)
Most movies, the anamorphic ones, I use the Anamorphic option. This rips the DVD at its native resolution of 720x480 and toggles the Anamorphic flag in the file so that QuickTime and AppleTV display it at its correct aspect. It's much better than people who squash their movies into a 720x400 video file.
Though on NON anamorphic DVD's, like WarGames, the older Titanic, Short Circuit 1, Young Frankenstein, etc I just rip at the normal non anamorphic 720 wide option and crop off the black bars. You don't lose or gain any resolution and never will with these icky DVD's.
So far I have 69 movies ripped. That's 112GB so far. Most are ripped at 2000. Some at 1000 and 1500 and that one ripped at 5000. Depending on their length the file averages out to 1.5-2.0GB each. And even at 2000, a lot of movies actually still have compression artifacts in them. I can't believe some people try and squish them into 700MB! The only people who should ever make them 700 are pirates who are going to share them. For people who can afford the extra HD space, rip yours at 2000 full resolution.
I also have 329 TV show episodes ranging from Arrested Development to Futurama and The Simpsons to Wonderfalls and Dead Like Me. That's 86.8GB so far. I'm only about a third or quarter through my DVD collection. I'm probably going to have to buy a TB FW HD just for my video library.
Do tests first. Rip a chapter in the middle of the movie in a few different bitrates and see which one looks bearable enough without being unbearable and go with that. But remember that depending on the amount of action, or different business of the frame, like screens with lots of action, your video may still look badly blocky. An example is Futurama. I ripped the entire series at 1000KBPs. The intro to the episodes is like a YouTube video. But once it gets to the show itself it looks fine. Only when you get lots of action and colors does it lose too much detail.