Sorry to hear of the issues you are having. Are you aware that there is a new version of Handbrake, now, v 0.9.1?

I am not sure how much of the thread you have read but my post on page 1 is pretty detailed and that method produces good results, albeit payable only with Nokia Media Player and I have made no mention of Media Converter because it is not used.

Since then I have been trying other methods and I am currently using avi.net
http://www.clonead.co.uk/

Results are excellent and the file plays on MPlayer. Again, MediaConverter is not needed for this either.