That's one of the things that irritates me with video transcoding, and I've been doing this "stuff" for well over 15 years now. I've got this rip I made of Iron Man, it's 2 hours and 35 seconds long. I made it into an Xvid AVI file using VirtualDub, reduced the resolution from the 720 wide DVD content (I own the retail DVD) down to 640 pixels wide (it turns out to be 640x258 as the final result), gave it a bitrate of about 700 Kbps and the end result file is ~699MB (was encoding to 1 CD presets in the script I use).
Now, that same movie, done directly off the DVD content with Handbrake into an h.264 at the same 640 pixels wide at 700 Kbps turns out to be 1.1GB - and here I was thinking h.264 was supposed to be the savior of video encoding and compression. The quality on the resulting files is very similar, but the file sizes are ridiculous with h.264 content.
I know the touch can handle higher resolution original files (meaning wider than the 480 pixel width of the touch, sideways of course), but then I decided to redo that encode at 480 pixels wide exactly to match pixel for pixel the width of the touch. The resulting file was still larger than the Xvid encode I made myself - by 249MB. A smaller resolution file, same frames per second, same color depth, ends up being ~30% larger... I just don't get that stuff.
As the touch is capacity limited (I have an 8GB iPt 1st gen I got at a pawn shop for $80 the other day), I don't plan on putting a bunch of movies on it, or even TV shows, but what I've noted is that DivX/Xvid compression is vastly more efficient than h.264 - and less processor intensive as well.
I recently got rid of my trusty Dell Axim X50v that I'd had for some time. I regularly just grabbed Xvid movie and TV show rips off Usenet - full blown 640x(whatever) DVD rips or TV off-the-air encodes and could play those on the Axim at a very low processor speed. The X50v has a 624 MHz ARM processor in it, and I could force it to operate at 208 MHz - and those videos would play back at a higher efficiency when benchmarked (sometimes in excess of 150% even at 208 MHz) using TCPMP's built in benching test.
What amazes me about all this is - in terms of video playback performance - just how truly weak the iPt is compared to that Axim. With the X50v I could play any video format I wanted without needing to convert anything to some proprietary or specific resolution/bitrate format while with the iPt I'm locked down pretty tight and the results aren't satisfactory.
Oh well... I'll keep making test encodes looking for the best balance between quality and file size, but honestly I'm a bit disappointed at how poorly these test results have been so far.
And for those that don't know it, Handbrake (at least on Windows and Linux) can transcode other formats too, it's not limited to just DVD content as the first post in this thread claims. I don't know if the OSX version is hamstrung by only being able to transcode from DVD content, if so that kinda sucks.
ps
And the X50v has a 640x480 LCD in it - I could watch the files I grabbed or made myself at native resolution and they were far far sharper and higher quality than anything I've been able to manage on the iPt so far... go figure.