That has to be one of the silliest comments I've seen here in a long. Even at the resolution you mention, you're talking a 4" screen, HD resolution is not necessary. I encode my movies for 300K size and the quality is excellent. On a 2Gb that 6 movies, more then enough to enjoy on a flight across the US.

I use linux to encode my movie with the following 2 pass via mencoder.

mencoder dvd:// -dvd-device $1 -aid 128 -ovc lavc \
-lavcopts vcodec=mpeg4:vbitrate=350:mbd=2:trell:v4mv:turbo:a spect=16/9:\
acodec=mp3:abitrate=96:vpass=1 -vf crop=704:432:6:70,scale=512:240,crop=400:240 -ofps 25 \
-af volnorm=1 -oac lavc -o movie.avi \

mencoder dvd:// -dvd-device $1 -aid 128 -ovc lavc \
-lavcopts vcodec=mpeg4:vbitrate=350:mbd=2:trell:v4mv:turbo:a spect=16/9:\
acodec=mp3:abitrate=96:vpass=2 -vf crop=704:432:6:70,scale=512:240,crop=400:240 -ofps 25 \
-af volnorm=1 -oac lavc -o movie.avi \

You may have to adjust the crop and ofps values depending on your source. I like using mencoder because I feel I have more control over the encoding, but if you looking for something a little easier check out

http://maemo.org/community/wiki/VideoEncoding