I have used handbrake &/or dvdfab 6 mobile to convert videos to 480x320 .m4v and use these for air video files. Is there an advantage to using the air video conversion on these files, and if so what is the air video conversion doing to the files? I am also viewing using 3g network, any advantage for use over the net?
If the files you've converted yourself play in iPhone there is no advantage in converting the files again with Air Video. For 3g network you might need to scale the resolution down and limit the bitrate - this is where air video live conversion comes in handy.
The resolution can be adjusted for each file and is displayed in file's conversion properties. The bitrate depends on selected quality and video complexity (generally videos with complex scenes and lot of movement will have bigger resulting bitrates than videos with little movement and simpler scenes).