If only playing back on a small display like the N900, I suggest that playback at native res is overkill due to the size of the screen. I use Handbrake.

1. MP4 /H264
2. 550 vbr / double pass (need this to get rid of motion blockies)
3. 96kb audio
4. Most vids are done at 536X300 (depends on aspect of video)
5. 23.96 fps

Advantages are more vids will fit on your card and less cpu power to play them back.

If you also plan on playing the vids back on a bigger display, native resolution (or the max of the original file) is best.