Yeah, I'm sure I would then, but what talking about is how they look on the ipod, as that's all I care about. And on the ipod screen the difference is very very slight.
Anyway, I've done more testing, and I've decided that how I will encode will depend on how good the dvd footage is. I just did the Jack jack short from the Incredibles DVD and with the pristine quality and clarity of that animation, then h.264 at 768 is clearly sharper. It looks amazing. But if I'm encoding an older movie like say, Spaceballs, I'll probably be able to get away with mpeg at 500 and not notice much difference at all. Still doing some more tests though.