After many many hours... I have given up trying to produce H.264 Ipod compatible video with mencoder...
I will try generating MPEG-4 with mencoder soon...
For now, I will simply use handbrake to make mp4 files...
If I cannot get mencoder to work , maybe I can get ffmpeg to do my bidding...
Oh, and I HATE IPODS
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oops, I forgot, handbrake only converts DVD media... I'll need to try ffmpeg now..