katsaflias, When chipods encounter frame rates higher than they can handle the generally freeze and show a Format Error warning.
I am not sure what rates the 2.0 inch screens can handle, as you have found it is still not possible to convert the higher res settings at higher frame rates but I doubt that there is room for much of an increase.
Personally I found converting at 208x144 12fps gave me better results especially with wide screen conversions. For me the trade off of a few pixels in height for the extra frames is worth it.
I use VirtualDub on all my conversions to resize, set frame rate, brightness, saturation, audio sync, crop out letterbox areas etc.
You can download my settings here if you want to experiment but you may have to reset the cropping to suit your video.
http://www.sendspace.com/file/o1oxio
I think as higher res players emerge with bigger screens and greater storage capacity we will see other chips being used and avi format instead of amv.
I am currently testing for review a new player released in China 2.0 TFT, 220x176 16fps xvid .avi. It is packed with features and audio enhancements and goes up to 4GB capacity (2x2GB chips) yet is only slightly dearer than top end chipods.
Review will be out in a day or so.