Personally I'd use Handbrake (and click the iPhone/iPod touch preset for best results), to convert your DVD files, which is free:
http://handbrake.m0k.org/
You don't say whether you're on Windows or Mac. If you're on Mac, you can use the free ffmpegX encoder system, or get VisualHub (I'd recommend this), to convert other videos to be iPod compatible.
If you're on Windows, then try SUPER,
http://www.erightsoft.net/SUPER.html#Dnload
Once you have videos in iPod touch format, drag the video files into iTunes, and they'll be put in a Movies section on the left. Upon syncing your iPod, you can set it to transfer the films across by clicking your iPod on the left, then choosing your options in that tabs at the top of iTunes.