A great freeware app for video on the Mac:
MPEG Streamclip (v1.9.3b8)
http://www.squared5.com/svideo/mpeg-streamclip-mac.html
My settings for converting videos for an iPod Touch (4thGen)
Choose "Export to Other Formats"
Select "Format: Quicktime Movie" -> "Options" button
Compression Type: H.264 (for best quality, choose Multi-pass)
Export Size Settings. Should be divisible by 16.
For audio, choose MPEG-4 AAC (LC)
Limit the overall Data Rate. This determines the size of the final file.