If you're going to rip to a VGA PPC, you want to go to the 5th device on the menu, the VGA E800 format. That will make the movie 640x480
I'd personally suggest trying this great free program at the same amount of space you were willing to try with PocketDixXEncoder (which is a great program, don't get me wrong).
http://www.fairusewizard.com/lang_en/index.html
So if you were hoping to make a 500 MB movie for your X50, just set FairUse at 500MB, Choose an audio level that makes you happy (say 96), set the program on "auto" (I'm decoding a movie at the moment, so I don't know what the actual choice reads), and then stay out of the OPTIONS area. Then rip the movie.
I think you'll be happy with the results.
Good luck!