The USB hub and an external drive is a great idea...I may go that route.
I still need to figure out how to turn the native VOB file from the DVD into a file the PS3 can playback though. I'm still working on that.
The thread I provided gives you great detail to doing the .vob thing.
What you will also find out is that it isn't necessary (or preferred) to rename the file from .vob to .mpg.
If you go the hard drive route, you will need to format it in FAT32 (also explained in that thread) and keep the .vob file you make smaller than 4 GB.
That thread has all the answers.