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if you will only be watching the videos on your iphone/touch anything over 480x320 is a waste, because thats the screen res of both (unless higher res screens at WWDC). But for now you can get realy good results handbreaking movies at a moidified iPhone HQ setting. Select the iPhone setting, change the bitrate to 1000kbps and then select picture settings, Uncheck "preserve aspect ratio" and change the res to 480x320. this will give you a 1:1 pixel ratio between encoded movie and screen res with no scaling. its what i use and it looks excelent on my iphone, even in verry dark movies such as "Planet of the apes" (the one from 2001 ish) and animation looks neer flawless.
 
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