There is one other option to get the file size below the 4Gb limit.
Using DVDShrink to custom shrink the movie vts set to a custom size below 4Gb, then DVDDecryptor to rip-out the movie to one vob file, rename to mpg as above and there ya go.
I know, another step, and another program to learn, but my two cents worth.
I've been wanting to do this for ages, transfer my movie collection for streaming to the PS3. Only catch, Chapters. Currently there is no support for chapters on the PS3.
I have played with re-encoders and the AVCHD (hope I got that right), xvid etc, and re-encoded Santa Clause 3 from DVD from 6Gb for the Main Movie, to 1.6Gb, 720p resolution with minimal quality loss. But Chapters! no chapters.