A few answers to your many questions (not in order).
1) Size of DVD/BD
DVD-Quality: A ripped DVD (where copy protection is removed) is around 4-6Gb of content on average. You can bring that number down considerably (to around 500/1000Mb if you accept lower quality in both audio and video.
BD disks cannot be copied right now, but there is a reason why they needed dual-layer disks going to 50G (full quality)! A 720P movie with DVD-style audio is about 6Gb.
2) iTunes + iPhone
You either need to take the audio out of your PC (SPDIF or analog) and into your HT directly or through an AirPort. The AirPort approach (the one I use) is only working with iTunes, but the DAC is pretty good. I you have a soundcard with an SPDIF outpout, you can simply pass a regular coax cable back to your soundsystem and then have all your PC audio redirected (that's the reason I use the AirPort; I only want iTunes redirected).
I have the iPod Touch with the "Remote" application, BTW.
