My settings:

Resolution: 400x240
Auto Crop : depends on how the original video is formatted. I try all three until I find one that makes the picture look normal.
Frame Rate : 25 fps (box left unchecked, no idea what that's for)
Aspect Ratio : 15/9 (read somewhere here that this is the aspect ratio of the N800 anyway)
Bitrate : 512

Audio bitrate: 96
No resample

I only wish it was able to do a bulk conversion using drag and drop. Instead, I have to manually drop each video into the converter, and after setting the preferences correctly, click Add and repeat.

A bit of a pain when you have around 50 episode of Initial D anime to encode :P

Ghoonk, thank you. Its working perfectly. I transferred over a bunch of my daughters tv shows and it worked perfectly

I've encountered similar situations. A bunch of my home videos (2~3 minutes) were converted to .mp4 with the "better" settings (640kbps video, 400x240, 27 fps, 96kbps audio). They played fine on desktop PC and N810/OS2008/Media Player. However some of those .mp4 videos are having the same stopping problem on Motorola phones (krzr and rizr). I'll try the lower settings.

[edit] Just tried lower settings, same problem.

Not to everybody: don't use .mp4, .mp4 has AAC audio which will not be decoded by the DSP. Use .avi with MP3 audio instead.

That could be the issue - but the video converter outputs .mp4 files. Is there anyway to change that? My input files are in wmv format that produced by Windows Movie Maker.

I have a whole bunch of short movies (BMW Films, the ones starring Clive Owen) converted from WMV format. No issues, using the N800 Video Convert 0.8.4 software. I'm not using the beta, by the way.