Dude, try dropping the bitrate only, and convert to h264 and aac, with an mkv (matroska container)
A bitrate between 600Kb/s - 800Kb/s might provide a good result and lower file size.
I peronally use Mainconcept Reference for my conversions, only fault is it doesn’t do DivX into other formats.
Yes, Mainconcept reference supports an rmvb output as well.
I began with several xvid/mp3 DVDRips that were 1.36Gb to 1.40Gb in size, and with these settings I now have them at around 700Mb to 900Mb in size. By dropping bitrate only.
I start off with 800kb/s as my bitrate, lower may give you the smaller files size.
