You have to remember that you are trying to take a 12-30GB file and compress it to something about 10 times smaller...that takes A LOT of number crunching. An hour is certainly a reasonable amount of time.
As far as files not playing, you must be picking a file type not accepted by either your hardware or what player app you are using.
With that in mind, NEVER use M4V files, they are just terrible. They are another one of Apple's file types...which are the worst ones to get because Apple thinks everyone is super stupid and has to use things there way.
Use .mp4 (it is accepted by almost every player I've ever seen) or .mkv which seems to be getting there but doesn't have as much support, espeically in Apple.
Once you pick the .mp4 file type, pretty much everything everyone here is saying should work but just in case you don't want to read it, for video keep the 1080 size with the codec of H.264 (or x.264, .264, etc.). You can play with the bit rate to see what still looks good for you but the 2500 suggestion should be good (if you are only ever going to watch on your pad, if you ever want to stream to a bigger screen or HDTV, use something like 5k or higher).
For audio you can use mp3 audio if you like although at the same bit rates AAC (the native mp4) is much much better. I always use the highest kbps possible but 128 is fine for most people. As far as channels go, once again if you are only ever going to watch on your pad or a TV with only two speakers, use 2 channels but if you might ever stream to a TV hooked up to an audio system with surround sound (not virtual surround sound but the actual 5 or more different speaker set up) make sure to use either AAC 5.1 multichannel (640kbps) or keep the Dolby Digital or DTS audio stream (only if your ipad or whatever can play it - probably not though).
By the way these "file" types (.mp4, .mkv, .m4v, .m2ts, .avi, etc.) are actually file containers, they are just a framework to hold the actual files.