HOWTO create a video juke box for your PS3

Won't bother right now with a full-on 'howto', but I had a bee in my bonnet to create a video juke box for our several hundred DVD collection and have them avail on the fly to our PS3. Figured the best solution for our needs was to have an external USB harddrive plugged into the PS3 was the way to go.

Did a lot of research and found many wanting to do this, but not many working out all the details. Much of the sticking points came from retaining the 5.1 surround sound (most were ending up with simple stereo sound).

Not sure if this is known by others, but the solution was frankly pretty simple - I did a simple backup of the DVD into a single VOB file and am playing it without any noticable quality hits.

So..... if there is any interest, I can detail:
- how I correctly format the 1 TB drive to work with the PS3 (wasn't obvious)
- how to backup the dvd

However what I'd like to know is are there any drawbacks to playing a VOB file versus MPG, AVI, etc. I'm just a little surprised nobody else came up with this solution on the many A/V boards I found along my path of discovery. Seems almost too simple.
Lastly, I see I'm going to have a problem as I continue to convert my collection as the PS3 interface might choke on displaying a large list of files (even if they are sorted into sub directories on the USB drive).

Guess the appropriate forum would be one of those A/V sites, but I aint a member there, and wanted to see what the eggheads here thought first!