Convert VOB to small AVI file. Best software?

  Flopper 09:18 21 Sep 2007

I want to convert a two-disc DVD movie which is currently 7.4 GB and 3.4 GB into either (1) one or two smaller AVI files or (2) a number of AVI files which can then be merged by the recipient.
I want to send these files via a file sharing website so they should be no more than 300mb (or 1.5gb maximum).
Can anybody recommend any software which will do the job, freeware or shareware or off the shelf?

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