Here are my very easy steps for encoding movies with the program AutoMKV follow these and you should not have a problem with any DVD, used in conjunction with my MP4 registry patch for WMP11 and you can stream your H.264 movies directly to your games console of choice.  This guide focuses mainly on cross compatibility between the two and by the way this is all free software so no need to pay for anything.

Slight update - this guide will also generate H.264/MP4 files compatible with the v2 Windows Media Center Extenders such as the Linksys DMA 2100/2200 if you stick to the Xbox 360 path as their H.264 profiles are the same.

Also AutoMKV v0.95 onwards now has a built in cross compatibility PS3/Xbox 360 profile so no need to use mine anymore.  Plus it comes with AVCHD/M2TS support which allows the easy creation of videos with H.264 and AC3 5.1 audio for playback on the PS3, read this link for more info.

Step 1: Download AutoMKV from here.

Step 2: You will need Avisynth installed & download the Nero AAC encoder too.

Step 3: Extract AutoMKV to a folder and extract the .exe files in win32 of the Nero AAC encoder zip into AutoMKV\exe\BeSweet\ folder.

Step 4: Start AutoMKV and you will have a main screen like this [though the one below is using my presets].

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Step 5: Look over at the container codec section, the container should be set to MP4, the codec as x264 and finally just select the "2_Pass_PS3_XBOX360" profile.

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Step 6: Now for the audio look were it says Nero AAC in the main window above and select that from the drop down box. The value of 0.40 = 128K you can change it to display the bit-rate by clicking on the !!! symbol if you want.  Generally speaking you can drag the slider up to the high quality section if you are allocating lots of space for the movie.

If you want regular AAC 2 channel stereo for cross compatibility then it should look like the screen below.

If you want AAC 5.1 audio [PS3 only] then from the drop down box select original instead and it would look like this.

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Step 7: Now for the resolution by default it is set to "Auto" which is what you should use in most cases. However if you are looking to maximize quality & know which movies you have are anamorphic [check the back of the DVD box for anamorphic logo] then I would recommend changing the value to 864 why you ask well it's a very long and complicated topic & one that makes my own head spin so just trust me on it and that your wide-screen movies should look better as a result. On some boxes the anamorphic logo may be missing but if it says "optimized for 16:9 wide-screen" than that usually means the same thing.

For everything else that isn't anamorphic use the auto setting.

AutoMKV auto crops the movie and takes care of everything else like frame-rates so no need to worry about that. 

For you folks looking to make anamorphic videos AutoMKV v0.95 onwards now does a pretty good job with it, look at the "Advanced Settings" tab & then under "Aspect Ratio Options" tick the box for anamorphic encoding also the resolution should be set to auto on the main screen. While the PS3 is fine there is a snag with the Xbox 360 displaying anamorphic videos properly because of the Zune software, see this entry for more details. This is why I suggest resizing to 864 for a 16:9 style aspect ratio instead as anamorphic support can vary among hardware and software players.

If you have a HD video source like a TV recording in MPEG-2 for instance and wish to keep it in HD then select "original" or "autocrop only".  If you wish to resize select 1280 (720p) or 1920 (1080p) as the width resolution or whatever the native resolution of the material is, AutoMKV will output the video in HD. I do not recommend doing this for upscaling standard definition movies though.

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Step 8: Under disk settings you can use a preset or use a custom amount just write the amount in MB like 2000 or 1100 etc.

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Step 9: Once all the settings are in place click on "Save Setting" in the bottom right hand corner. This will ensure that all the changes above are retained every time you start AutoMKV.

Now to encode a movie just open a file under the "Input" section and point it at your movie .ifo or the first .vob in a DVD set, then all you have to do is select a file size, name, save location. When you click on "Add to Queue" the "Start Queue" button will show or just click on "Start Encoding" to begin without a job queue and your away.

All my movies are encoded in this manner and work perfectly.

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A few pointers...

• If you need to deal with subtitles for a foreign language segment in an English movie then read this separate guide on the topic I wrote, only burned in subs for MP4 containers are supported by the Xbox 360 & Playstation 3.
• If artifacts (blocks from compression) are noticeable and bothering you try this matrix it is optimized for high bit-rate encodes so aim somewhere in the 1.5-2GB+ range with DVD's, to use it simply download the EQM AVC-HR file and copy into AutoMKV\profiles\x264-profiles\matrix folder. Then in AutoMKV under advanced settings tab select EQM from Cust.matrix then encode as normal.
• Only the PS3 supports AAC 5.1 audio, if you use that then the videos wont play on the Xbox 360. The Xbox 360 only supports 2 channel AAC LC audio in MP4.
• If your audio source is not AC3 5.1 in the first place then it will not encode to AAC 5.1 even with that set in the configuration.
• Also you cannot put AC3 audio in the MP4 container (well technically you can) but it is outside the MP4 standards and as such neither the Xbox 360 or PS3 will play such a file.
• If space is not a problem go with a size setting of 3500MB this will ensure that the video gets very high near DVD quality and remains playable on any external hard drive connected to either game console for maximum flexibility [4GB file size limit because of FAT32]. Neither the PS3 or Xbox 360 support the new exFAT file system which lifts the 4GB individual file size limit.
• File sizes for MP4's higher than 4GB are permitted but only when streaming over a network link and from the Xbox 360, the PS3 will not play such files even when streaming over a network [this could be resolved in a future firmware update to the PS3 as it supports larger than 4GB files for other containers like .VOB or .M2TS].
• The stock RemoveGrain(mode=2) filter in AutoMKV is very light doesn't hurt to leave it enabled.
• If a movie comes out interlaced then for some reason the auto detect feature failed in AutoMKV by going to the "Advanced Settings" tab & set the "Deinterlacer" to "Interlaced" this will force AutoMKV to deinterlace the film, but this will add additional time to the encoding process.
• AutoMKV is multi-threaded which means if you have a dual or quad core CPU then for maximum encoding speed use those machines.
• If you have a video source that is very noisy/grainy and of poor quality [like old TV shows] then try using the FluxsmoothT(14) filter instead this is a combination of de-noise and sharpening filters. Often the resulting video may look better than the original with some of the old shows I have converted though of course your mileage may vary, some older movies or poorly transferred recent films to DVD can also benefit by using the lighter FluxsmoothT(7) filter. The FFT3DFilter also works well but is more suited towards movies of good quality in the first place but you wish to remove the noise/grain.
• If you happen to notice some intermittent stuttering or freezing during playback on either game console, this is down to the PC's CPU usage being maxed out probably because you are running AutoMKV converting another movie, the simple solution is to not max the CPU out to 100% usage while streaming videos from the same PC.
• For the PS3 if you cannot live without AC3 5.1 audio, encode instead with the M2TS container read this link for more info or in AutoMKV select MKV as the container & copy original as the audio format. Now encode as normal but then go to this link and use the software there on your MKV, keep in mind that H.264/AC3 5.1 in a VOB container will only be playable on the PS3.
• The videos encoded in this manner are compatible with the animated video thumbnail feature in the PS3 XMB if the video is copied to the internal hard drive of the PS3.
• For Zune media server compatible H.264/MP4 files select the "Default" profile instead of the PS3/Xbox 360 one, but you lose H.264 high profile support.