MakeMKV + Handbrake Tutorial Video
I would highly recommend purchasing makemkv, it is a great product and worth the money...especially if you have a large bluray collection you want to digitize.
MakeMKV offers free decryption for DVDs and a trial of 30-days for bluray movies.
2500 kbps is best suited for a standard wireless router to stream to PS3/Xbox.
From what I understand, under the US Fair Use, one can make one single backup of their digital content. I'm no lawyer, so I claim no legal correctness.