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The "Advanced" tab has a truckload of really good stuff in it. All of which I know little to nothing about, except that when we selected the "Ipod" preset in one of the first couple steps, Handbrake pretty much preconfigured this stuff for us. In my playing with other settings, I have found that fooling with settings on this screen, or choosing a different Handbrake preset back in the beginning can cause Nook to not want to play the encoded video. These settings work, if you find something better, let us know.
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