Okay it worked, thanks again Bryan4203
for making me see I should split it before I re-encode it. Here are the long awaited steps to easily playing your BluRay (or HD-DVD) (or decrypted DVD's for that matter) on the PS3 without the need for the disk:
0. Follow the Comprehensive Guide: Blu-ray back-up and Decryption via PS3 1.
With the file output from step 0, run http://www.dekabyte.com/filesplitter/download.html and select it and the destination 2.
Click the drop-down menu "Size of Pieces" and select custom 2.5
Click and make it MB and fill in the box with a file size less than 4000 2.75
Click "Split" 3.
Goto the destination and rename the files so they end in ".mpg" again and rename them so they aren't the same name (add 1 or 2 or 3 or P1 or P2 to the file name) 4.
Open VLC Media Player 5.
Browse.... and select one of the files you split 7.
At the bottom check "Stream output" then select Settings... 8.
Check the File... box and the select where you want the file and the file name ".mpg"
(Note: I sugguest the destination here be your external drive) 9.
Under the area that says "Encapsulation Method" select MPEG PS 10.
Click "Ok" and the "Ok" again and the encoding will take place, and five minutes later your file will be ready
The re-encoding process will take 2 minutes per GB so Talladega Nights will take 40 Min. even though the size of the disk is 25GB full the main movie is only 20GB.
Told you it was easy, told you it would be right under you nose if you read the other guide.