Which do i choose?

I am sorry for asking this but I am a complete newbie...

I want to convert .avi files to watch on my PS3
The PS3 is connected to a 1080p screen (BENQ)

Which is better, the 1080 or the HD plus conversion?
I noticed that when I choose the HD plus option the output screen resolutions values are between 592 and 640 x 352 and 272..will such a low resolution be any good?
I've read that if I use mkv2vob I can watch .mkv files on my PS3...will this program help?

Will it be ok to put the subsequent file on a usb stick and use that in the PS3?

Also what bit rates do I choose if the 1080p is the better option?
Is the 1080p output file a .mkv?

Sorry if these questions seem random and confused...its because I am completely confuse as what to do...

Thanks...

My experience is that only

My experience is that only the 1080p profile for the converter keeps the right aspect ratio for HD media sources.

If you're choosing low resolutions then the quality will be poor - check the options and ensure you've configured it to output unresized.

1080p

ok so if i am going to use the 1080p conversion profile...
if i want the best quality available....
i limit file size to 4000mb
i set the custom resolution to 1920x1088..
what do i set the total average bitrate to?
do i set it to the maximum allowed
which is 5383 for video
160 for audio
and 5543 total?

thanks for your help...