first, you need a better OS. Win2k or XP with NTFS.
Then you need a lot of storage. I have 1.2TB for my videos. >700 titles.
how many movies are you talking?
Software wise, it's up in the air really. I use DR.Divx cause it's all in one. but it's not free either. There are other tools out there, but I'll let other tell you what they think is best.
Good luck.