[tpaxadpom]

my favorite application for converting, cropping, resizing, editing is avidemux 2.5 (free). You can copy or reincode audio and video separetely. It's too bad album player on TP2 doesn't support videos with mp3 sound as quite a few of them would play right off the bat.
For video format use mpeg4-ASP (Xvid). You can do 2 pass or single pass, constant bit rate, average bit rate, basically everything you can dream of.