I love the fact that I can store/watch videos on my omnia without having to convert them, but found I was taking up a lot of my storage space doing this. For movies I want to keep on the phone, I found the Vio mobile video converter that the piratebay released. (don't worry, the converter is free/legal)
http://vio.thepiratebay.org/
It has presets for the omnia (among others), and using the advanced options I have found that if I set the video quality to Full Quality, the framerate to no more than 25fps, the volume to 100 & the encode size to around 550 I can get decent quality videos that were 700 meg to 1+gig down to 400-500 meg. 2+ gig looks good with the encode size set to 650 and convert down to about 615 meg. They probably wouldn't look good with the tv out, but they look fine on the omnia's screen.
Now I can store all my old favorites on the phone & still have enough room to drag/drop some new stuff I want to watch to the phone unconverted.
Be sure to read during the install, you have to opt out of a toolbar install & if I remember correctly, a homepage change.