In my experience, this will likely depend on what you'll be using to play back the files. Outside blatant lack of support for any particular format, you should play up to the decoding prowess of your particular player.

That said, most generic playback apps and devices seem to be able to handle an avi container with some type of mpeg4 content such as XVID. The other thing to keep in mind is what resolution you'll make your new files. DVD content can be anamorphic, but the anamorphic flag isn't supported in all codecs and file types, nor by all players, so you're probably going to end up with a different resolution than your original DVD.

From here you can go up or down by matching one of the DVD's resolution axis. For instance you can match for 640 width (the approximate viewable size of the 720 non-square NTSC pixels) and then go for a reduced vertical resolution to match your video content. For example, an anamorphic DVD that's a full 480 tall would end up as 640x362.

Or you can match for the vertical and expand the horizontal. You're creating some fake horizontal resolution, but more importantly, you're keeping all the original vertical resolution from the DVD. For instance an anamorphic DVD that's a full 480 pixels tall would end up as 848x480. Something in a wider perspective would end up as 848x something smaller (you're not going to encode black letterboxes in the video file).

Yo may notice that Apple's 480p trailers are most often 848 wide. In the DVD ripping world however, now one seems to do this. Instead you'l see stuff like 640x..., 624x.... or even 592x....

My goal is to just have enough HD space so I don't have to waste the time to transcode. It's what takes the longest amount of time and generally has the propensity to produce the incompatibilities and sync issues one might see. Just straight DVD rip (optionally leaving out some extras) and saved as a disk image (ISO). This solution is less portable, but you can always transcode from it later. Akin to keeping FLAC music and making portable MP3s as needed at a later date.