I used the following Handbrake settings successfully.

Format: AVI
Video Codec: MPEG-4 (XviD)
Audio Codec: MP3 (lame)
Audio Sample rate: 44.1 kHz

The disadvantage of Handbrake is that you can't limit the maximum bitrate. In practice, playing from the SD card, you'll probably be OK but might get some skipping on high action scenes.

Tablet-encode will allow you to specify a maximum bitrate.

Frank