Convert Vob To Mkv Freeware

Posted this in the Ripping forum first by mistake so reposting it over here..
So up until now I've happily converted DVDs using the Divx Converter program to AVI files to watch on my old 27' tube TV. Everything worked fine and I didn't really care about quality since the TV couldn't show good quality anyway.
I'm now upgrading to an HDTV and setting up a PC to run XBMC via an HDMI connection so I want to start converting things in much better quality. I'm looking for advice and info on the various options that are out there. I know lots of these questions have probably been answered in other threads but I haven't found all the answers in one place to get a good discussion going.
This applies to regular DVDs, not Blu Rays as I don't have a Blu Ray Drive.
So here goes..
FORMAT
What is the best format to use for high quality while maintaining low file size? I'm familiar with MP4 and MKV files. Is that pretty much the standard these days? What about AVI files with higher quality settings? Any reason to look at that at all?
Also, what is the difference between MP4 and MKV files? It's the same file inside with a different wrapper right? So why would I choose one over the other?
SOFTWARE
So the Divx Converter program has a setting called Plus HD that creates MKV files. I've also used Handbrake which creates MKV or MP4 files. I've seen people recommend using HB with a setting 19 or so as a good place to start. Does HB do things that Divx doesn't? Are there certain options to set or change to get better quality if time is not a concern? I haven't found an in depth Handbrake tutorial yet..
Are there other programs people use to do the conversions that I should look into? I'm completely open to anything that's out there.
I did a test with two DVDs and ran one through Divx Converter with the default settings up top and one with HB with the 19 setting to MKV. The resulting files are:
DVD1 (Magic Mike)
Divx - 1.2 gigs - 856 x 360
HB - 700 Megs - 720 x 362
DVD2 (Snow White and the Huntsman)
Divx - 1.5 gigs - 856 x 368
HB - 1.1 gigs - 720 x 364
I'm not sure on the best way to compare the quality (can I run two instances of VLC at once maybe?) but the file sizes are obviously different and the resolution are quite different as well. Really not sure why the resolutions are off.
Anyway, thanks in advance for any info, advice, links, tutorials, etc anyone can offer

Posted this in the Ripping forum first by mistake so reposting it over here..
So up until now I've happily converted DVDs using the Divx Converter program to AVI files to watch on my old 27' tube TV. Everything worked fine and I didn't really care about quality since the TV couldn't show good quality anyway.
I'm now upgrading to an HDTV and setting up a PC to run XBMC via an HDMI connection so I want to start converting things in much better quality. I'm looking for advice and info on the various options that are out there. I know lots of these questions have probably been answered in other threads but I haven't found all the answers in one place to get a good discussion going.
This applies to regular DVDs, not Blu Rays as I don't have a Blu Ray Drive.
So here goes..
FORMAT
What is the best format to use for high quality while maintaining low file size? I'm familiar with MP4 and MKV files. Is that pretty much the standard these days? What about AVI files with higher quality settings? Any reason to look at that at all?
Also, what is the difference between MP4 and MKV files? It's the same file inside with a different wrapper right? So why would I choose one over the other?
SOFTWARE
So the Divx Converter program has a setting called Plus HD that creates MKV files. I've also used Handbrake which creates MKV or MP4 files. I've seen people recommend using HB with a setting 19 or so as a good place to start. Does HB do things that Divx doesn't? Are there certain options to set or change to get better quality if time is not a concern? I haven't found an in depth Handbrake tutorial yet..
Are there other programs people use to do the conversions that I should look into? I'm completely open to anything that's out there.
I did a test with two DVDs and ran one through Divx Converter with the default settings up top and one with HB with the 19 setting to MKV. The resulting files are:
DVD1 (Magic Mike)
Divx - 1.2 gigs - 856 x 360
HB - 700 Megs - 720 x 362
DVD2 (Snow White and the Huntsman)
Divx - 1.5 gigs - 856 x 368
HB - 1.1 gigs - 720 x 364
I'm not sure on the best way to compare the quality (can I run two instances of VLC at once maybe?) but the file sizes are obviously different and the resolution are quite different as well. Really not sure why the resolutions are off.
Anyway, thanks in advance for any info, advice, links, tutorials, etc anyone can offer