What is the best way to convert MPEG-2 videos to MP4 H.264?
The solution I use for converting MPEG2 from DVD image or EyeTV recording to iPod-friendly MP4 H264 is based on HandBrakeCLI, the command line interface of HandBrake. It is also possible to use FFMpeg.

The settings are much more complex but offer much more freedom.

I spent some time figuring out what are the best options for me, then I put it in a bash script, so that I just have to give the pathname of the DVD image or the EyeTV recording as an argument to my script.