I recommend the following...
Use the x264 container.
Audio Bitrate no lower than 640 kbit
Video Bitrate no lower than 8000, no higher than 14000...
Good rule of thumb = Source-2000
Quote:
6.1) First pass:
x264.exe --pass 1 --level 4.1 --stats .stats --bitrate 8000 --threads auto --bframes 3 --me dia --ref 1 --subme 1 --no-dct-decimate --partitions none --progress --no-psnr --no-ssim --output NUL movie.avs
6.2) Second pass:
x264.exe --pass 2 --level 4.1 --stats .stats --bitrate 8000 --threads auto --bframes 3 --b-pyramid --weightb --me umh --ref 5 --mixed-refs --subme 7 --trellis 1 --analyse all --8x8dct --no-fast-pskip --progress --no-psnr --no-ssim --output movie.mkv movie.avs
Your movies are likely going to stick in the area of 10GB for 1080p. You can see returns of 7 GB with 720P but 10GB is about the low end with 1080.
BTW, Those are the official rules for scene rips, granted they're criminals but they tend to know what they're doing so following their advice isn't a bad idea when it comes to av conversion.
If you want the entire set of rules:
http://paste2.org/p/807118