are you using the latest ffmpegx?
because there is an iPod h.264 preset which works perfectly.
http://www.ffmpegx.com/ipodh264hires.html
i've tried both ffmpegx and iSquint (
http://www.isquint.org/) and i think the quality is slightly better from ffmpegx, but iSquint is faster and honestly the difference isn't that great.
i tend to convert with iSquint at mid to low-mid quality and it looks fine on the iPhone (and the iTouch) and the file sizes are nice and small
if you're getting a load of dvd boxsets for xmas and want to watch them on the train to work each morning, then i use Handbrake (
http://handbrake.m0k.org/) for that. makes it nice and easy to get the episodes into iTunes.
once in iTunes you'll be wanting to change the ID3 tags so that the tv shows and movies show up in the correct areas on the iPhone and have proper images too.
currently i'm using a combination of MetaX (
http://www.kerstetter.net/page53/page54/page54.html) and iTunes itself. Anyone have any better suggestions for this? because sometimes i find the files end up in iTunes and i can't Get Info on them - have to go to a file before or after, bring up the info window, and then Next/Prev to the file i want to adjust