How to convert HDV to iPhone 4

I have Final Cut Pro 5.1.4 and Compressor (1st version)...what are the BEST settings to convert my HDV 1080i video (1440 x 1080) to a H264 format that iTunes can accept and I can import/sync into my new iPhone 4. I have Compressor from like 5years ago, so I have no presets for any of this..I can CUSTOM all of the video settings so the iPhone or any other device can play it...but I need the settings.
Max Bit Rate? Two Pass Encoding (yes/no), frame rate, resolution? What other settings
Am I best to convert to 960x540 the native resolution of the iPhone 4 or should I convert to 1280 x 720 in case I plug my iPhone into an HDTV? Will either play or look better?
Thanks.

Ok, I found a number of answers thanks to your points (another board). Huge thank you!! I posted this question in 3 Apple Discussion Boards and no one came close to a solid answer that explains the heart of it like you did...and I checked out what you said and you are right on.
One of the videos in particular that I encoded at 6,000 kbps...well when I cut out 5 seconds of the most complex part (256 videos being played and shrunken down...cool effect!) that segment when I cut it out and save it as it's own Quicktime Movie the bit rate shows 17,000 kbps....I know the iPhone 4 can do at least 10,000 kbps in my trials and you may be correct that it can do 14,000 kbps...I tried a simple video at 15,000 and it failed...so I think you are about correct with the 14,000 number....certainly between 11,000 - 14,000 would be its max at 1280 x 720p and audio at 160 kbps AAC.
Ok, 1 more key point....I reencoded that video at 5,000 kbps which actually should be fine for 720p with my stuff (I was only using 6,000 to get a tiny bit more out of the video...negligible) and that failed also..I looked at the most complex part and found it at 15,000 kbps..again cutting out that 5 second spot...so I am now reencoding at 4,500 kbps for that video and 4,000 and 3,500 just to see when it begins to work.
I believe on MOST (80%) of the videos I've done at this 720p resolution that 6,000 kbps works on the iPhone...but it's probably safer to set it at 5,000 and then I'm guessing you'll get 95% work....and perhaps at 4,000 or 4,500 (I hope) you'll pretty much get 100% of the videos to work on the iPhone 4.
I am still testing so I'll report back tomorrow night for sure. Just so you know the bit rate for small segments of video (that could cause iPhone 4 non compatibility) is more than 2-3 times...it's more like 2-3.5 times it appears. So if you divide the max bit rate by 3.5 perhaps that's the safest setting if you want a sure fire way.
This is real interesting..NO ONE has mentioned this and Apple's support line did NOT even mention or know about this area at all.
After I compress my 6.5 minute video...4 different ways...tomorrow night...we will know for sure...that video with that 5-10 seconds of real complex stuff has to be at the very upper end of compression challenges...if I can get that max rate..every other video should work and we'll have a sure fire max compression rate for this particular format.
By the way I am experimenting with 960 x 540 a little bit just to see how much more latitude that would give one. But I think for future proofing and for hooking the video up to an HDTV that 1280 x 720 is the ideal format IF YOU DON'T WANT TO BE SAVING MULTIPLE COMPRESSED COPIES OF VIDEO.
More tomorrow-

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