Wow - I am watching two different threads on the forum concerning Craig's efforts for the PS3 thing. The suggestions/solutions I am seeing are well-intentioned, but painfully trying to re-invent the wheel.

In the other thread on this subject, I posted a link to this thread at Home Theater Shack.

I have no allegiance/personal ties to that thread, but here's the deal. Those folks have already gone through ALL of the pain you are exeperiencing and camer up with solutions to all of it. The thread is essentially a guide. You will find:
1) you need two pieces of software (DVDDecrypter and DVDShrink two deal with getting the DVD done. No conversions required.
2) How your drive must be formatted for all of it to work (including use of an external drive if desired).
3) How to use a streaming program (TVersity I believe)if you don't want to use an external drive.

I am stumped as I watch the multitude of suggestions show up in this thread when the complete process, including answers to questions that haven't yet been asked, are in that thread I referenced.

Please - read the thread.