[basementjack]

I've been using DVD fab too, great program!

personally, I don't think Xvid looks as good as the original DVD in a good upscaling dvd player - so I've used my server mainly for tv shows, kids movies, etc.

my xvids play over the network to a number of devices - the xbox 360, the klegg media share, and I hear the PS3 works also, so long as your file size is below 2gb.

I have not tried a ps3 so I can't comment on that, but the klegg blows away the 360 for media playback. The klegg can play whole dvd's ripped to your hd as .iso files, as well as xvid files (and many others) I plan to add a sticky on the klegg when I have time to write it up properly. The klegg is available in the USA from frys - I have seen it on sale there twice for $129

as for storage, if you are good with PC's and have access to software, then building a small server is the cheapest/best way IMO. On the other hand, if you have no experience with that, or you don't have any OS you can use, and you would have to shell out $$$ for windows, then those stand alone network hard drives really begin to look attractive.

however you look at it, you'll need a backup - I use a combination of internal drives in the server, and external drives for backup.
Internal protection schemes like mirroring and raid 5 are not adequate as they don't protect your investment from accidental deletion or corruption.

For your needs, you'll probably want 2x 1 terabyte hard drives - one internal, and one external to backup the internal. you should be able to get roughly 500 movies on the drive if you use xvid.

if you build a small server, I'd suggest a small drive for the OS, and use the 1TB drive for storage.