Here's how I do it. This can probably be streamlined some more but this isn't too hard and does a great job.
Step 1 (if necessary): Sometimes it's helpful or necessary to rip the DVD files to disk first.
Mac The Ripper does a terrific job. The files will go into a directory on your hard drive but will still be in the native DVD format.
Step 2: Convert the DVD chapter(s) to MP4. Use
Handbrake. You can either point it to your DVD drive or you can point it to the directory you created in the first step.
Step 3: Add the MP4 to iTunes and synch your iPod.
If any of this requires more explanation, please feel free to ask.