Digital Movie Library Setup

I've spent many hours now researching how to rip my DVDs into digital format, browse the list of movies on my TV, and play them. I thought it should have been fairly simple, but it seems anything but. I can't seem to get around some technical issues (and least not without taking out a second mortgage). I'm hoping I can get some feedback on whether I understand this correctly or not (especially before I go out and buy new hardware).

The goals:

1. I don't care how much disk space it takes, I want exactly the same video and audio quality I get when I put a standard or high-def DVD in my player.
2. I want to maintain chapter titles, but I just want the feature, not the extras.
3. I want to be able to sit on my couch and with either a remote or my MacBook, browse movie pics and select one to play.
4. This isn't about ever downloading movies in digital format only -- I'll always want the physical DVD as a backup.

Current equipment:

• MacBook Pro
• CTR-350 WAP using EVDO broadband
• 50" Panasonic Plasma
• Blu-Ray player
• Dish Network PVR
• receiver with surround sound

From here it looks like there's two ways of doing this:

The first:

• Buy an Apple TV and a 1 TB hard drive and connect the Apple TV to my HDTV and receiver via HDMI and optical audio cables.
• Use Handbrake on my MacBook 0.9.2 (after upgrading to Leopard) to rip the DVDs using the 5.1 surround and AAC+AA3 audio codec and 2-pass encoding.
• Use iTunes on my MacBook to import my movies into its list and Apple TV will be able to see and play them. Since Apple TV has a remote and already provides menus, selecting a movie "on demand" would probably be fairly user friendly.

Problems with this:

• It doesn't appear I can attach the extra hard drive to the Apple TV via USB (at least not without a hack I'm not comfortable with). I can attach the hard drive to my MacBook while I'm ripping, but if I have to leave it there to access my movie collection, I'm not happy. I can barely keep the power cable in while my laptop is in my lap on the couch with the cat on top of me. Having another cable strung across my lap isn't a solution. I read about another guy who connected the external hard drive to his Airport, but my Cradlepoint only has one USB which is dedicated to the EVDO card and I've read the Airport doesn't support the EVDO card. Am I missing something about where to hang the extra drive?
• Also, I'm not sure if this Handbrake option really keeps the best video quality. By putting it in a format iTunes supports, am I compressing it?

Which brings me to option 2:

• Buy a Mac mini rather than an Apple TV along with that 1 TB hard drive. The drive could then hang off the mini. The mini would connect to the HDTV via a DVI to HDMI cable and a MiniPlug Adapter cable.
• Use MactheRipper on my MacBook to rip DVDs in their native format (those VIDEO-TS and AUDIO-TS folders).
• Make sure the mini is running Leopard and use that version of Front Row to find movies on the hard drive.

Problems here:

• This is a much more expensive option.
• Maybe I'm dense, but how do you access the mini (wouldn't I then need a separate keyboard and stuff to use the mini)? Or can I run it from my MacBook?
• Isn't this going the wrong way in terms of future technology? I mean, isn't Apple TV the direction of the media center?
• I can't tell whether or not the Apple Remote for the mini would work in a user-friendly way for ripped movies and TV episodes.
• Those conversion cables? Am I going to lose quality of audio or video?

Am I on the right track with either of these? Any feedback?

Thanks so much!

One option:
Use HandBrake Freeware to Rip your DVDs. Rip them in .mp4 format. So that front row or Apple TV can play it effotlessly. Yo create chapters as well in .mp4 file. To get your content on the TV...You can either get Apple TV or Mac mini.
Well I'm not quite familiar with the way Apple TV works...But the apple TV only synchronoises your iTunes library isn't it? If I'm correct then Mac Mini is better option as you can simply Rip your movies either on mac mini itself or your laptop. And yeh you can access your Mac Mini from your Macbook through remote dekstop.

If you use Handbrake, and I would highly recommend it, make sure you use the Apple TV preset.