I tried the apple reccomended settings of 480x320 but the screen always got cropped. I did right try clicking the file in iTunes and converting it for iPod, and it displayed correctly, but it was 1.1Gb in size. (Too large IMO)
I then used these settings in Super and got the file down to 750mb and it isn't cropped and displays widescreen with great audio.
So first I ran DVD Decrypter and followed the first part of the tutorial in the link I supplied in the first post. After getting the 4GB VOB file, I ran it in Super and converted it using these settings and got a 750MB file that displays great on the iPhone. Once you drag it into the movie folder, you can click it and hit get info to change the display name, etc...
I increased the audio and framerate from the stock iPod Super settings, but I'm sure you can lower it to 25fps and also lower the bitrate of the audio, but I wanted to see how it sounded less compressed.