This is a subject I know quite well. I've ripped my own personal bluray collection to MP4 using the 64bit version of x264.exe. MP4 was my container of choice as its more widely supported but MKV is ok. They can both contain H264 video and multi channel audio so its up to you. The reason I did it was to watch a few movies on my ipad when working away (hotels in the evenings are boring when on your own) and to make sure the physical discs are hidden as my little boy likes playing with them.
Most new films sit between 30gb-40gb but don't forget they also contain uncompressed audio along with multiple language soundtracks.
Depends on the filesize you are aiming to reach but anything less than around 8gb should ideally be done at 720p. If you don't mind increasing the filesize then of course stick to 1080p.
Mine are 4gb 720p using 5.1 aac audio at 320k bitrate. The movies look almost identical on my 42" V10 Panasonic plasma. If you get off the sofa and look right up at the screen you'd be hard pushed to tell the difference but now and again you can sometimes make out the odd misplaced pixel.
Don't forget to keep the chapters and look for forced subtitles as these are needed now and again. Example is say Star Trek 6 when the klingons are speaking....erm, klingon
Check each one when finished as sometimes forced subtitles can be used for other things like the first transformer movie. This one had the forced subtitles for extra material like the making of the CGI transformers.
If you find a movie which does not contain one huge .m2ts file then you have to use HBRextractorGUI (or something like that) and EAC3to to join all the little .m2ts files by going on the playlist for the main movie.
One nice little feature you can do is bu grabbing the coverart from
www.cdcovers.cc and adding it in as a poster. This enables windows to show the coverart as a thumbnail which is nice for PS3/AppleTV or just plan windows folder browsing.
Encoding a bluray rip will take a few hours. My PC (see sig for specs) takes around 3hrs a film on 2pass
Ripbot264 is the package I'd recommend for this task. It's a GUI which uses lots of independant tools which are meant to be very good. (x264.exe for example)
p.s. don't forget to make sure normalization is off