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Yes, Air Video streams over 3G. Works great on both my iPad on Wi-Fi as well as my iPhone over 3G.

I use Air Video as well, but still use Handbrake to encode everything. This way, I can watch my entire library on my Apple TV at home (without Hacking) and have files I can stream via Air Video without any need for on the fly conversion. It just works.

I agree, it works better than I could have ever imagined over 3G. I too convert mine to save space and as you mentioned, no need for on the fly.
 
Personally, I couldn't get Handbrake to work correctly. Haven't gone back and tried again, though. I went with DVD Ripper, which while it takes longer to rip a DVD than it would to actually watch the movie (!), it does a fine job of ripping, and setting the file up with iPad settings. I have been satisfied with DVD Ripper.
 
New Build.

For the new build it does not have a internal protection dycripter therefore i can not back up my dvd's to the iPad. How do you guys do it?
 
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