I am going to talk through how I edit with DVDShrink to make VOB's I use on my PS3. This is a tutorial of sorts, I would love to hear anyone else doing this. I am also posting this to get feedback from one of the guys at work who apparently is having no problems with streaming at all. Hope he can compare notes and then let me know what he's doing differently!
Basically just be sure in “Edit” then “Preferences” then “Output Files” tab the “Split VOB files into 1 GB size chunks (recommended)” is not checked. This way it will VOB everything into one file.
Make sure your stream selections look like this:
I also turn off preview so it goes faster.
I then go into “Re-Author” and pic the Title 1 under “main movie”. Every DVD looks slightly different here.
Drag and drop that into the left side. Then click on “Compression Settings” on the right. I am pretty sure you can unselect all but one of the AC3 audio tracks. I haven’t tested much here, your mileage may vary. I also chose no compression so the video itself is at full resolution.
UPDATE: Please note that by setting "No Compression" the video looks amazing (just as good as the DVD itself) but it seems to cause stuttering issues with my PS3 and others that I have been sharing knowledge with. If you choose "Automatic" it seems to sometimes not change the size of the file, I can tell a slight degradation / pixelation of the video, but it works fine on the PS3 when streaming to it. Your equipment and how you perceive your high end video will probably determine how much of an impact this will have on your video.
Then just click “Backup!” and you’re good to go. Just be sure to click “Create VIDEO_TS BLAH BLAH” checkbox so it will just create one folder. Then you just use the VOB, throw away all the other junk.