If you search the forums there are many techniques that work for people. In the end we do what works for us.

FWIW I have tired a video bitrate of 1024 and the size:quality ratio is just too great for me. 512 is my sweet spot with a resultant size of 600mb approx.

reedy, your settings look fine to me, I suspect your playback issues are related to codec/player choices. Perhaps try other encoding techniques?

My experiences is that some results play back better on the Nokia Media Player than on MPlayer and vice versa.