Notes that seem to need clearing up on the internet:
1. Handbrake is still your friend. In 0.9.4 (current version) use the profiles named “High” or “Normal” and all is well. They support HD if you see note 2.
2. Keep it under 4 gig. If you’re encoding to HD – make sure to use the ‘target size’ instead of the quality slider. I usually set it to Normal, 3900 meg, 2 passes. Then – and this is important – go do something else for 12 hours.
3. The ElGato Turbo HD encoder DOES make PS3 friendly files in 1080p mode, size permitting (see 2). A friend is performing vicarious encodes of the Iron Man 2 trailer for me, so I can’t answer all your questions yet. But they do play and look good. Oddly, they are bigger than the source, but we’ll worry about that more later.
4. ps3mediaserver works great, especially if you don’t feel like compressing your ISO images. This includes seeking, playback from ISO images, etc. If you do decide to encode down to the PS3 native formats, it’s just like having it on your local disk. And the price is right!
This is as of April 2010 and an up-to-date PS3. Kids currently watching *redacted* without scratching discs, thank you very much.

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