Video Format=MPEG-2(better quality) but some players support MPEG-1(average quality).
Audio Format=AC3,LPCM,DTS but most players will support MP2.
I would encode at 352x240,MPEG-2,1500KB/s.
DVD movies that you buy are always 720x480,MPEG-2 with a variable bitrate of ~6000KB/s.
BTW...You are also confusing "transcode" for "encode".Transcoding is for reducing the bitrate,encoding is for changing formats and resolution.