I vote for FairUse if you want free (and Pocket DVD Studio if you don't) but if you want options, this guide uses all freeware.
http://www.pocketmatrix.com/guides/dvd2divx/
I used it to get The Matrix under 260MB with no stutter and no pixelation.
Perfectly synched as well.
The section about using HeadAC3he can usually be skiped because most modern DVDs rip straight to WAV and don't need audio processing.
I used to use it exclusively but Pocket DVD Studio is quicker.