Read the mdvdp guide very carefully, study the example and if you still have trouble read the excellent documentation and look at the examples provided with the player. If you still have questions then you should go to the official homepage , and post a message to the forum. If yes, reboot, check if all drivers and codecs are correctly installed, or try another conversion program. If not use another rip program, preferably run vobdec in a command prompt, then test if the files are okay. I can't stand questions of this kind.
Every human being has another visual perception.
Depending on your requirements the bitrate is different. If you aim for a certain number of CDs I strongly suggest you use Fair Use, Nandub or the DivX4 codec in 2 pass mode, as the DivX3 codec is very inpredictable and without these programs mentioned you'll spend a lot of time figuring out an ideal bitrate for your movie and settings. The point of VKI is that the encoding application puts keyframes where they are most needed instead of putting them at regular intervals as regular DivX does. Note that this only applies when using a regular simple encoding tool, mpeg2aviVBR, Fair Use and Nandub to VKI by default and the respective guides will tell you how to configure the codec there. All but the first VOB file in a movie don't start with a valid header and that's the only thing your decoder gets if there's no header.