* Note: the below requires the use of Windows so if that is not an option for you, you can save time and stop reading now 
There are a few threads on here about converting blu ray disks into an ATV2 compatible format but they are a little fragmented. Some dont address the subtitles issues while others dont address the ability to create a file that can play across ATV, iPad, etc. Also, I find some instructions to be more difficult than they need to be. I thought i would outline my process which has worked very very well for me on my 124 BRs and is about as easy as it gets as far as I have found.
First a few notes.
1) This process involves using PC-only software. For those with a PC, its easy. For Mac users, you will need to either have a VM install (which I have found most people on this forum have) or run your Mac in boot camp when you are doing this process.
2) My method assumes you do not want subtitles unless they are forced as in Avatar, District9, etc. I have to imagine this is the case with a majority of people.
Software Used:
1) AnyDVD HD [PC-only] - Software for ripping the Blu Rays unprotected (that you own of course) -->$85/w trial (note, I have not used it but DVDfab Key supposedly does the same thing and its free)
2) Another EAC3to GUI Plus [PC-only] - a EAC3 front-end that does it all -->Free -- http://www.curtpalme.com/forum/viewtopic.php?t=17002
(a) To use Another EAC3to GUI Plus, you will also need to download and install the following (Dont worry, once installed you will never have to open them or worry about them):
Haali Media Splitter -- http://www.acdnow.com/AnotherEAC3toGUI/MatroskaSplitter.zip
Eac3to -- http://madshi.net/eac3to.zip
MKVtoolnix (MKVmerge) -- http://www.bunkus.org/videotools/mkvtoolnix/win32/mkvtoolnix-unicode-3.3.0-setup.exe
BDSup2Sub -- http://forum.doom9.org/showthread.php?t=145277
Java -- Latest version. http://www.java.com/en/
3) Handbrake [PC or Mac] - Everyone should be very familiar. Use the lateste stable nightly build. Important. -->Free
Process:
1) Download and install all the software above
2) Load your Blu Ray into your drive (I have a Plextor B320SA) - AnyDVD will automatically read your disk and remove the copy protection (which i assume of course is only done to your owned/purchased content)
3) Open Another EAC3to GUI Plus. When you set it up for the first time, it will ask for the location of “eac3to.exe”, “BDSub2Sub.jar” & “mkvmerge.exe”. Browse to the location of these applications. Also in the Options section, since I am just concerned about ATV, choose "Core Only" as this will extract the core audio track only. Also make sure to uncheck "Add non-forced captions". In the advanced options, make sure a work files location is chosen and if possible, make it a different drive than the output folder. This dramatically increases re-mux times. Once done click ok and the rest of the MKV creation process is straight forward and quick. See the guide provided in the link above for Another Eac3to GUI Plus.
*Note: I prefer this option to Clown BD or other methods of extracting the different BR components separately or even MakeMKV because Another EAC3to GUI Plus does all the steps for you automatically to convert from BR disk to MKV and also is able to find and extract the forced subtitles automatically for burning in (discussed later) in Handbrake. It is also very quick and converting from MKV to MP4/MV4 in Handbrake also enables you to keep chapters easily.
4) Open the latest nightly build of handbrake (important you use a nightly for DTS to AC3 conversion) and open your recently created MKV.
5) Handbrake settings have been discussed ALOT in these threads so i will just list mine but point out the important items.
Picture Tab: High profile preset. Container is MP4. Width set to 1280.
Video Filters: All Off
Video: Use deafults
Audio: So here i create 2 audio tracks. A 5.1 track for the ATV and a stereo track for the ipad/other devices. Source should be your DTS or Dolby 5.1 track in the MKV. There will be only one. For the first track, Audio codec will either be AC3 Passthrough (for dolby 5.1 tracks that were part of Core track in TrueHD Blu Ray) or AC3 ffmpeg to convert the DTS to AC3. Mixdown should be Discrete 6.1. The samplerate and bitrates should fill in automatically but at the least bitrate should be 640. Now add another track and highlight it. This one should have the same source. Audio codec should be AAC (faac). Mixdown can be Dolby PL II. Bitrate at 320.
Subtitles: If there was a forced track, under track you will see one subtitle track listed (ie 1 English Vobsub). If there wasn't, likely no forced subtitle track present (havent encountered a case yet where this was wrong). Now, to avoid any issues with force flags etc, i "burn in" the subs. Thus make sure to check, Default, Burned In, and Forced Only. Then click add.
Chapters: You will see they are all there.
Advanced: Leave on Defaults
5) Click Start or add as many to the Queue as you want and then fire it up.
This process results in a nice, high quality Mv4 file that plays great on my ATV2 while also able to play nicely on my iPad. While the above seems like a lot of text and steps, majority of it is just first time set up.
Again, what I like most about this setup is that even though something like MakeMKV may be easier for steps 1-3, in reality its not since once AnyDVD is installed it runs on every disk installed automatically so you are then down to MakeMKV setup vs Another EAC3to GUI Plus, and the latter is more flexible for me because of its ability to pull the forced subtitles more easily.
My only downside personally is I am working with a 2.8 C2D so the MKV process takes 20-45 mins and then Handbrake can take 4-10 hours depending on the file. But I am slowly converting my Blu Rays and am looking to upgrade to an i7-860 in the next few days.
I hope this helps and if people would like, Id be happy to throw in screen shots with settings if it would help.
There are a few threads on here about converting blu ray disks into an ATV2 compatible format but they are a little fragmented. Some dont address the subtitles issues while others dont address the ability to create a file that can play across ATV, iPad, etc. Also, I find some instructions to be more difficult than they need to be. I thought i would outline my process which has worked very very well for me on my 124 BRs and is about as easy as it gets as far as I have found.
First a few notes.
1) This process involves using PC-only software. For those with a PC, its easy. For Mac users, you will need to either have a VM install (which I have found most people on this forum have) or run your Mac in boot camp when you are doing this process.
2) My method assumes you do not want subtitles unless they are forced as in Avatar, District9, etc. I have to imagine this is the case with a majority of people.
Software Used:
1) AnyDVD HD [PC-only] - Software for ripping the Blu Rays unprotected (that you own of course) -->$85/w trial (note, I have not used it but DVDfab Key supposedly does the same thing and its free)
2) Another EAC3to GUI Plus [PC-only] - a EAC3 front-end that does it all -->Free -- http://www.curtpalme.com/forum/viewtopic.php?t=17002
(a) To use Another EAC3to GUI Plus, you will also need to download and install the following (Dont worry, once installed you will never have to open them or worry about them):
Haali Media Splitter -- http://www.acdnow.com/AnotherEAC3toGUI/MatroskaSplitter.zip
Eac3to -- http://madshi.net/eac3to.zip
MKVtoolnix (MKVmerge) -- http://www.bunkus.org/videotools/mkvtoolnix/win32/mkvtoolnix-unicode-3.3.0-setup.exe
BDSup2Sub -- http://forum.doom9.org/showthread.php?t=145277
Java -- Latest version. http://www.java.com/en/
3) Handbrake [PC or Mac] - Everyone should be very familiar. Use the lateste stable nightly build. Important. -->Free
Process:
1) Download and install all the software above
2) Load your Blu Ray into your drive (I have a Plextor B320SA) - AnyDVD will automatically read your disk and remove the copy protection (which i assume of course is only done to your owned/purchased content)
3) Open Another EAC3to GUI Plus. When you set it up for the first time, it will ask for the location of “eac3to.exe”, “BDSub2Sub.jar” & “mkvmerge.exe”. Browse to the location of these applications. Also in the Options section, since I am just concerned about ATV, choose "Core Only" as this will extract the core audio track only. Also make sure to uncheck "Add non-forced captions". In the advanced options, make sure a work files location is chosen and if possible, make it a different drive than the output folder. This dramatically increases re-mux times. Once done click ok and the rest of the MKV creation process is straight forward and quick. See the guide provided in the link above for Another Eac3to GUI Plus.
*Note: I prefer this option to Clown BD or other methods of extracting the different BR components separately or even MakeMKV because Another EAC3to GUI Plus does all the steps for you automatically to convert from BR disk to MKV and also is able to find and extract the forced subtitles automatically for burning in (discussed later) in Handbrake. It is also very quick and converting from MKV to MP4/MV4 in Handbrake also enables you to keep chapters easily.
4) Open the latest nightly build of handbrake (important you use a nightly for DTS to AC3 conversion) and open your recently created MKV.
5) Handbrake settings have been discussed ALOT in these threads so i will just list mine but point out the important items.
Picture Tab: High profile preset. Container is MP4. Width set to 1280.
Video Filters: All Off
Video: Use deafults
Audio: So here i create 2 audio tracks. A 5.1 track for the ATV and a stereo track for the ipad/other devices. Source should be your DTS or Dolby 5.1 track in the MKV. There will be only one. For the first track, Audio codec will either be AC3 Passthrough (for dolby 5.1 tracks that were part of Core track in TrueHD Blu Ray) or AC3 ffmpeg to convert the DTS to AC3. Mixdown should be Discrete 6.1. The samplerate and bitrates should fill in automatically but at the least bitrate should be 640. Now add another track and highlight it. This one should have the same source. Audio codec should be AAC (faac). Mixdown can be Dolby PL II. Bitrate at 320.
Subtitles: If there was a forced track, under track you will see one subtitle track listed (ie 1 English Vobsub). If there wasn't, likely no forced subtitle track present (havent encountered a case yet where this was wrong). Now, to avoid any issues with force flags etc, i "burn in" the subs. Thus make sure to check, Default, Burned In, and Forced Only. Then click add.
Chapters: You will see they are all there.
Advanced: Leave on Defaults
5) Click Start or add as many to the Queue as you want and then fire it up.
This process results in a nice, high quality Mv4 file that plays great on my ATV2 while also able to play nicely on my iPad. While the above seems like a lot of text and steps, majority of it is just first time set up.
Again, what I like most about this setup is that even though something like MakeMKV may be easier for steps 1-3, in reality its not since once AnyDVD is installed it runs on every disk installed automatically so you are then down to MakeMKV setup vs Another EAC3to GUI Plus, and the latter is more flexible for me because of its ability to pull the forced subtitles more easily.
My only downside personally is I am working with a 2.8 C2D so the MKV process takes 20-45 mins and then Handbrake can take 4-10 hours depending on the file. But I am slowly converting my Blu Rays and am looking to upgrade to an i7-860 in the next few days.
I hope this helps and if people would like, Id be happy to throw in screen shots with settings if it would help.
