nii,
I rip all my DVD to avi using CloneDVDMobile (unfortunatly not freeware). Takes about 30 minutes for a full lenght movie.
Then I pre-process with VirtualDub (Resize, De-Interlace, Crop, Adjust Brightness\Saturation, Sharpen, reset frame rate to 16fps same as AMV to prevent hopping, adjust audio by -200ms as AMV converter causes a slight lag in audio sync ) and process without any compression. Takes about 15-18 minutes
Then convert to AMV.
I find I get better quality by pre-processing this way than with straight conversion. I posted a guide
HERE along with screenshot samples.