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Best you can do for encoding on the computer is Xvid, loved by rip groups and video geeks alike. You can easily encode an hour-long (41-44 minutes, without commercials) show to 640x360 or similar, depending on the aspect ratio, and have it as a 350MB file. If you've ever downloaded a TV episode before, this is what you've watched (or ~175MB for a 20-22 minute 512x384 half-hour show). DVDs are generally done as 1-3 700MB files, depending on the length of the movie and whether it's a stereo MP3 or surround-sound AC3 rip. 700MB for an average-length movie is cutting things a bit slim as there will be noticable artifacting, especially on slight gradients of the same color (ie a dark background), so 400MB must be pretty painful. Multipass VBR encoding is always a good choice for archival purposes, as you can get better quality for the same filesize.
So, get VirutalDub and Xvid, and encode away (Doom9.net is a quality site for all sorts of encoding related help, as mentioned above).
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