Personally, I'm doing the same thing, but using the following method:
DVD Decrypter to make an ISO > Handbrake to make a h.264 m4v file. I use AAC audio, 44.1 kHz, 128 bit (or thereabouts), no downmixing. Video I set to approximately 400 MB per 30 minutes, sometimes upping it to 425 for 5.1 sound, using 2 pass encoding and chapter markers. Rinse and repeat for each individual Title on the disk you want to rip. So far, from curiosity testing, artifacts are minimal and the resultant is sometimes identical to the input (though this does, of course, vary on bitrate and DVD). As a side effect, the encoder in Handbrake will suck up your cores like no tomorrow. I've got a quad core, and it pegs each one if I'm recalling correctly, so I usually process at 90-110 FPS as an average. I do have a problem with an encode not completing every now and then for some reason. Usually, about a quarter or so of my conversions just fail to convert, but it gets them on the second pass.
Plus, as a side bonus, the resulting file seems to be playable on the 360 without transcoding, though I've got a gut feeling this isn't true. TVersity is acting all crazy recently, so take this with a grain of salt. It may have well been transcoding and I didn't realize it. The reason I say this is because (1) the 360 downloaded the AAC codec, and (2) I could seem to stream these h.264 files but not Xvid files. Again, please take this with a grain of salt.
If you want better quality, I'd say head for 500-600 MB per 30 minute segment, though you'll start hitting diminishing returns. Still, it's a heck of a savings over your average 1.5 hour MPEG 2 DVD movie. Personally, I'm still fine tuning, but +/- 100MB here and there on each 1.5 hour rip doesn't matter much. Also keep in mind I run this on Vista x64 with 4GB RAM and a QX6700. DVD Decrypter 3.5.4.0, Handbrake 2.4/CLI 0.9.0.