I seem to have a similar setup (47" 1080p). I have no specifics on the Divx decoder, I used AutoGK (free) with the 75% quality 1-pass profile and XVID. It gave me a 1.5 gig file (from 4 gig), which seem very close to the source material in quality, but not quite identical. This is for animation with AC3 sound. As a general statement, a 1.5gig file seems like a good start for a typical standard def widescreen DVD movie with AC3 sound.
Btw, standard def DVD is more like 720x480. Sometimes less then 480 as the "real" theater format is larger than widescreen, and black bars are visible on top and at the bottom.
If you want quality IDENTICAL to the source material, you can repackage the DVD leaving it in MPEG2, either as a Program or Transport stream. MPEG Streamclip (free) is good for that. Expect NO space saving, but NO loss of quality either.
Once I get around to ripping my few DVDs, I'll probably use the 75% quality of AutoGK, keep the AC3 sound, probably in 2 languages and let the size be whatever. I need to figure out how to create subtitles I can turn on and off before that, though. This would seem like acceptable quality with substantial space savings.
On the flip side, there is probably a case to be made for giving a shot to VC-1, too. I mean creating a Windows Media file with VC-1 encoding with Windows Movie Maker on XP. VC-1 (format of blue ray and HD dvd) is one of the most efficient and the box supports a couple of the profiles. Only problem is that the sound cannot remain AC3, AFAIK, and has to be transformed to multi-channel WMA, and I have no idea how to feed that to my Dolby Digital receiver. I am a snob for that and I don't want to revert to stereo when the source is AC3. Best to you, and feel free to share your results.