| If you've got a DVD, then use MacTheRipper to remove the DRM and copy it to disk. Handbrake will have a go at this, but it's slow and not so good. THEN point Handbrake at the vob files on disk to convert to h.264 (or divx for other devices).
However if you've already got a movie file (divx avi or similar) then you need VisualHub. It's $20 or something, but well worth it - you'll spend hours hunting for a free way to do it, so save yourself the time, and pay up. It's great for ocnverting anything to anything.
If the movie already plays in iTunes but not on your iPod, then iTunes itself has a convert for iPod menu option which should do the trick. However as some movies won't play at all in iTunes this may not work.
It all comes down to finding a pipeline which works for you, and sticking to it:I typically use handbrake to convert DVD's to AppleTV mp4's (full res) then use visualhub to convert for PSP an other devices. It's also good for converting divx to mp4.
Ian | 
