After significant testing I have found a solution that I can share with others - albeit a far from optimal one - to at least get MP4 movies to work without having to re-encode them. (However, there is no fix currently for embedded Chapters not being supported.)
My movies were encoded as stated above, with the MeGui Xbox360 preset: AVC High Profile Level 3.1 video, AAC-LC 2ch audio. However, some of my later encodes were tagged in the MP4 metadata as Level 4.1. This is a result of the MeGUI Xbox360 preset being updated in line with Microsoft adding new features by firmware updates. However, nothing was different with the ACTUAL encoding - only the Level tag changed.
http://www.ode2.com/?p=12
http://en.wikipedia.org/wiki/H.264/MPEG-4_AVC#Levels
There is a SINGLE BYTE in the MP4 that declares AVC level. *iTunes will refuse to sync a movie merely if it doesn't like that one byte for AVC level*. It will not allow any movie tagged as Level 4.1 or higher to be synced, _even if in reality it doesn't exceed Level 3.1 limitations_. (Consult Wikipedia for those resolution and bitrate limits.) It doesn't even look at what the encoding method was, or if it really will render on the iPad! The warning dialog lies! Ridiculous.
By changing literally
ONE byte out of 1
giga byte file, I was able to transfer my movies to my iPad. Instructions are below. My new request to the developers would be to remove that arbitrary restriction on AVC level from iTunes, or at the very least change it to a warning dialog saying "+The movie may not work *FOR XYZ REASON*, but proceed anyway+". I know the iPad is officially stated as only supporting up to AVC High Profile Level 3.1, but it
shouldn't arbitrarily reject media like the PS3 does either.
Also, the order of Audio/Video tracks (which one is first) doesn't seem to matter for compatibility. I've tried both ways using multiple muxers, and either way worked. YAMB worked best. As long as it can be dragged and dropped into the Library interface, and play inside iTunes, it works on the iPad.
*How to change AVC Level in an MP4 without reencoding (or demuxing):*
1.) Open up the MP4 in a hex editor (HxD is a freeware for Windows - be warned: it tries to automatically save a "backup" copy when saving, but that can be aborted)
2.) Search for the hex "61 76 63 43" ("avcC" in ASCII) - it should occur only once near the top
3.) The next byte after that is usually "01" and isn't important
4.) The next two bytes declare Profile ("42 E0" = Baseline, "4D 40" = Main, "58 A0" = Extended, "64 00" = High).
5.) The next byte declares AVC Level ("1F" = Level 3.1, "29" = Level 4.1, "33" = Level 5.1)
6.) Change whatever is in the AVC level to "1F" in hex and save. Try syncing the movie to the iPad again. (It would also be a good idea to check to see if you are violating the AVC 3.1 limits by doing so.)
Hope this helps someone else. I'm ticked off since I already burned my movies on DL's for trips, and now I have to copy them all off to a hard drive to Edit. Then I have to re-burn them on the expensive discs again. All of because an arbitrary
one-byte flag rejection in iTunes.