I would really avoid the average bitrates in handbrake.

It doesn't seem to be im
plemented very well. I've seen cases, and others have reported it too, where the
FFmpeg encoder hits a wall and increasing the bit rate does not increase the fi
le size. This can happen around ~ 2000 kbps with DVD video scaled to 640x480. I
saw someone suggest that this was because there was no more information to encod
e, ie the quality was already at a maximum. But if you can find some dark scenes
, you'll probably noticed some very awful blockiness in the darker regions, whic
h may also be washed out a bit. I have not been able to eliminate this blockines
s except by using constant quality and cranking the slider up to 100%. Even at,
say, 96% constant quality the blockiness is just as pronounced as at lower bitra
tes.
Having said that, I can't reproduce seeing this on most LCD screens because they
just aren't bright enough. But on a CRT, when looking at still frames, it is ve
ry clear that the quality of certain frames is significantly poorer than the ori
ginal MPEG2 encoding on the DVD, which is what your original question was about.
To give you an idea of how quickly this encoder starts discarding information, I
have a clip that is 372 MB at 100% quality, 131 MB at 96% quality, and 55 MB at
90% quality.
And I also find that H.264 as implemented in HandBrake can actually be much WORS
E than MPEG-4. On a test clip I've been using, H.264 at 90% quality looks notice
ably worse than MPEG4 at 100%, despite that fact that the H.264 file is more tha
n twice as big. As I said above, the quality loss is only blatantly apparent in
dark scenes, but it's not hard to detect in other places as well if you have the
original MPEG-2 video for comparison.
Most likely you'll end up accepting some of this quality loss. I've been trying
to resist it but I'm probably going to have to give in since data rates of 9 MBP
S can be hard to stomach even with a big hard drive. My two suggestions are to u
se constant quality (at least 90%) and don't bother with H.264 while you're at h
igh bit rates (I have not tested HandBrake at lower bitrates to see if H.264 per
forms better there). But you really should investigate other quality settings be
cause the loss may not be noticeable on your TV or flat panel. Instead of encodi
ng an entire disc, pick a short chapter that's a few minutes long and encode it
several times with different quality settings.
-What's the bitrate of a raw DVD?
Just for comparison, I ripped Boundin' and Jack Jack Attack from The Incredibles
DVD. I tried three different settings: constant bitrate at 1000 and 2000 kbps,
and then constant quality at 100%. The other settings were:
-

MPEG-4/AAC
FFmpeg
128 kbps, 44.1kHz, English AC3 5ch
framerate "same as source"

Here are the outcomes:

Boundin': 37.5MB (1000), 69.7MB (2000), 294.5MB (100%)
Jack Jack Attack: 35.8MB (1000), 65MB (2000), 190.7MB (100%)
Obviously, the 100% setting made a huge difference. I haven't watched them yet o
n my 100" projection system.