I havn't got an ipod but I do have a pmp so convert quite a bit for that. Have a look at handbrake theres a preset for ipods, looks like you need to convert to mp4 for it to work.
Or theres formatfactory thats good, or vidrop 0.54 which I use but you'll need to put the settings in manually the first time if there isn't a preset but I find that gives better results on my pmp.
Or maybe this which was the first result on google.
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