I have no idea why it's not working, but try converting a short episode with everything the same, but lower the bitrate and changing frame rate to either 29.97 or 30.
Let me know the result..
Right I just tried a 2 min file from the starts of a Brothers & Sisters DVD (it was the next series I'm about to start converting)...anyway
I changed the bitrate to the following:
2000bit - NO SYNC
1500bit - NO SYNC
1000bit - NO SYNC
500bit - NO SYNC
The Picture Output is still the same: 640x352 - these are for most of the file i've converted with Handbrake.
The only stuff that will sync (as is doing it while i type this is): Offical Downloads from US iTunes. Desperate Housewives Season 4, Gossip Girl Season 1 and Moonlight. - Don't know their bitrate, but picture is: 640x480, and 640x360.
Hopefully I can see what the video look like on my Touch in the next couple of minutes.