I've added some stuff i've tested to the wiki http://a320.bluwiki.com/go/A320_FAQ#Wha ... A320_do.3F
I used Handbrake.fr to convert video's using the "psp" preset (and using ".mp4" not ".m4v" file extension) is working great and conversion is quite fast.
Handbrake can only "burn" subtitles "on the screen" when using a DVD as source however.