Handbrake and MeGUI are 2 different apps.
Really comes down to preference. They both use the x264 codec, so will be basically the same, except the UI.
I've only used handbrake once so cant speak to much about it.
But if im not mistaken, MeGUI just has alot more options for tweaking the encoder, but a bit more complicated to learn.
Handbrake has a lot of good presets, where as MeGUI is all manual but a little more flexible.
It has things such as EAC3to to extract streams, AC3 encoder, BeSplit, Nero option, Bitrate Calculator, TS muxer, MKV muxer, MP4 muxer, AVI muxer, and many more. Plus a slew of encoder settings.
Or at least it used to be that way, please correct me if wrong. As I said, I havent used Handbrake in a long time so it very well may have changed.
What you will need:
1. One of the 2 x264 GUis. Handbrake OR MeGUI. Which ever you prefer.
2. Avisynth
Avisynth rev. 2 | Get Avisynth rev. 2 at SourceForge.net
3. If you want to use Nero for you AAC audio,
Nero - Download the Nero AAC Codec
I find this to be the best Audio encoder for AAC, even 5.1
4. FFDshow. I would highly reccomend Shark007s.
Shark007's FREE Codec solutions - Windows 7 codecs
Just set Use FFDshow in the H264 tab.
That will get your encoder set up. You may need to set the directory in the options to where Nero AAC encoder is located.
And as Arc pointed out, you will need a decrypter.
The one mentioned is a good one. Theres also the option of AnyDVD which works great, but a bit on the pricey side.
Once you get used to the x264, you will not want a Xvid
