As far as a target for the decrypted dvd, click on the folder icon next to the target line. This will allow you to browse to any spot on the hard drive or even make a new folder to put the video in. If you go over to the last icon on that line, it will let you save as an ISO if you prefer.

What are you using to play the vob files? If you click on each one individually, then yes, you get the results you describe. But if you use a dvd player like PowerDVD or VLC, you target the DVD Video folder that is produced by DVDFab HD Decrypter. It contains the Video_TS folder and Audo_TS folder. It should play seamlessly.