so H.264, what is minimal bitrate that is watchable. PSP basically is 768kps, is it good enough?
It really depends on the resolution of the video and the type of material you want to encode, meaning if there is a lot of movement and action you should go a little higher with the bitrate. For a resolution of 800x480 you can start with 768 kbps and work your way up if needed (talking about H.264 and RMVB RealVideo 9/10).
I encode to mp4 (H.264 video, aac audio) for my HTC Touch HD WinMO Phone (also 800x480 screen resolution) and usually set the bitrate to somewhere between 750 and 850 kbps with great results. If you encode files specifically for a certain device it makes sense to encode them to the native resolution of that device since you will get great quality without your PMP having to up/downscale the video to display it (lower CPU load - longer battery life). For a 16:9 source (1280x720 or 1920x1080) you set the resolution to, in our case, 800x448.
Of course, it's possible to play 720p RMVB files on the ONDA VX535/545, just keep in mind that resolution has approximately 2.5 times the pixel count compared to the afforementioned 800x448 so your files will turn out much bigger (because the bitrate has to be adjusted accordingly) without much benefit if you just wanna watch them on your device.
COWON D2+ / COWON S9 / HTC HD2 / cMoy v2.02 Amp