How can I quickly reduce .mpg files?
If you're comfortable with the command-line, FFmpeg will do the job. 

Since these are VHS rips, 5-10 mbps is way overkill when using the H.264 codec.

Suggested command:

ffmpeg -i rip.mpg -vf yadif,scale=iw*sar:ih,setsar=1 -crf 18 -c:a aac -b:a 128k rip.mp4


This will deinterlace the video, then convert it to a square pixel representation. Audio codec is AAC @ 128 kbps. Video bitrate control method is CRF, which strives to allocate bits as per content complexity i.e. tries to maintain uniform quality throughout. 18 is a good value for SD content. Lower values produce better quality (and larger files) but shouldn't be necessary here.



You can create a batch file to automate the conversions or use a GUI like Avanti, which has a job control manager.