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Yeah, good questions.
1) Sounds like the resolution is the problem, is the DVD widescreen? If so, you might have to force the size of the video to go 4:3 rather than 16:4, but that does small distortion of the video.
2) Yeah, I don't know how FairUse does it, but Pocket DivX Encoder allows you to add the subtitle file, which I think will allow you to choose the subtitle file "On" or "Off" depending on what you want, might want to try that.
3) Just bring the audio down, it'll save you some space, usually a 450MB-500MB will be just fine for video, plus bring the audio down to 96kbps, you may even want to put it to MONO unless you are going to listen to the file with headphones or a speaker set up. I sometimes will hook up powered speakers, but if I'm just going to take the file to go, the Axim only plays MONO audio anyway.
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