Hi dogfart

1.) What is the best file format psp.h264.aac? This is what others say they use.
2.) Fast encoding or high quality encoding? Fast (1 pass)
3.) Does the bit rate make a difference? Yes. Look at the "bits/pixel" column use the bitrate slider to keep it 0.2 or higher if you have room.
4.) What about frame resolution? The Zune's display is 320 x 240... if I used a different frame resolution would it fit the screen?Don't have one so I'm not sure how it reacts. Experiment by ripping only one chapter (Advanced Title Settings) at different screen sizes and see how it looks. This will vary with different movies as well.
5.) Last but not least Audio bitrate. Would there be a significant difference using something higher than the default? Probably not but you be the judge.

Have fun with your Zune!