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.