use DVD decrypter to get the files to your HDD, then use simple divx to convert the vob streams to a divx .avi. Then download TMPGenc and encode to MPEG1 with a low resolution and bitrate.
I got The Matrix down to 400MB 160x128 res (native Iriver H10 20GB resolution) and 300kbs vbr. Mine starts playing slow after 5 min or so, im trying to figure that out though. :p best of luck.