Family Guy is a 1.33:1 aspect ratio, so 432 X 320 with auto cropping is would be fine, however that frame resolution is not good for 2.35 movies. I do agree with dropping the frame rate on animation, save space and no visible loss, however everytime I have tried that with regular movies they end up being very jerky looking to me.
I have noticed that doing 2 passes makes the file smaller as well, but encoding takes twice as long, not really sure what it is doing on the second pass that it did not do on the first pass but results in smaller file.
Now as far as using H264 video with AAC, I thought that was the default when selecting the iTouch from the drop down menu. There is also an option for H264G, but not familiar with that one.