I use handrake on a macbook pro. It produces movies that play great on the droid. I choose the "iphone/ipod touch" preset and rename the resulting m4v file as an mp4.
Yeah, handbrake handles drm just fine. On the mac for the newer versions of handbrake (http://handbrake.fr) you also need to install vlc player (VLC media player - Open Source Multimedia Framework and Player). I've used this program multiple times with no problems. The program is pretty robust and easy to use. If you want to give handbrake a shot and have questions/problems, pm me and I'll help you out.