What format for network streaming?

I was wondering if anyone had any experience with network streaming of video. I am currently ripping more of my dvd movies to my htpc and converting to h.264 (SD), and was wondering if there was a better format to use. I kind of figured due to its small size, it would be an ideal format plus nero easily converts it. I have been targeting about 1GB per movie (main movie only). Is there a format that would work better (so far it seems to be working fine)?

Also, all the hard drive spots are full on my htpc (120GB, 2x160GB raid, 3x160GB raid and a 500GB). I have more controller spots with 3 ide (6 drives) and 4 sata onboard and controller cards if necessary but the case is full. As I have more drives and am trying to get most of my content to the front computer, I was going to try to use a network usb hub for externals (capable of about 1MBps over the network). Is there something that might work better for that due to the speed limits or is h.264 good due to its high compression.

Lastly, I have been targeting 1GB per movie. Should I try to go smaller?

Any thoughts would be appreciated…