How do I convert video for an iPad?
Handbrake is a nice open source video conversion tool.  Here is a blog post with some good info on settings to use for iPad rips/conversions.

As for getting videos added to iTunes automatically, that is not something Handbrake will do.  If you are using OS X however, this AppleScript seems like it would be up to the task.  The script watches a folder, when a file is copied in it waits for the file to stop getting larger (when the copy or encode [in this case] is finished) and then adds the item to your iTunes library.  I haven't had a chance to test this for myself though, so I can't guarantee it will work as desired.