DVD Rebuilder (using CCE, HC, or any other true encoder) creates entirely new I frames for its project, since it only uses the original as a reference while encoding a completely new stream.
With transcoders it depends on your settings. As such, transcoders such as DVD Shrink and CloneDVD2 leave I frames alone, and applies its compression to B (and, to a much lesser extent, P) frames. This allows more frames with high detail to sneak by, giving you better perceived quality than some other transcoders offer.
On large movies such as Lord of the Rings, however, the end result will be quite noticeable. The encoder will give you a better perceived quality compared to a transcoder. Because once again, it only uses the original as a reference while encoding a completely new stream that will fit on one DVD-5.
This all goes back to the "what's the difference between an encoder and a transcoder?" debate.
BTW, I personally use the HC encoder. Additionally, I suggest you get the DVD Rebuilder Pro. as you can choose a different Matrix for different movies.
For instance, I use the BDVD matrix to remove the grainy effect Steven Spielberg uses in the "Band of Brothers" 6 disk set. I don't care for the grain effect and so prefer my backups to my originals.