Go get this free software:
http://handbrake.fr/
It does the job FAST. Choose the "Iphone and Ipod touch" setting. Save as .mp4 I have my video resolution at 480 x 272 (16:9 aspect) and 360 x 272 for 4:3 aspect
This little piece of software does a tremendous job. You can see the results at
http://claudiamarie.mobi/ I did the first few on my PC and then once I had the setting tweaked the way I wanted it, I installed it on my server and whenever I run a new update I have a script that has handbrake running on the server to make the mobile version and toss it on the mobile site.
As far as pictures go...I just use the same exact ones that I use on the "regular" site. The smart phones seem to resize them to fit their windows just fine.
EDIT: The trailers you see are 720 x 400 on the tour. They are the same trailers I use on both the regular and mobile sites.