Question about choosing resolution with Fair Use Wizard

[jimdagys]

I have a DVD movie that is 2hr22min that I want to turn into AVI with Fair Use Wizard.
Fair Use Wizard will select a resolution for me based on the file size (see screenshot, red circle). However, it seems to me that selecting a higher resolution (blue circle) would give a clearer picture. I don't care if there are some artifacts. I would rather have artifacts than a blurry picture.
My question is: Doesn't "lower resolution" translate to more blurry picture?
What problems might I encounter if I choose the higher resolution?

[manono]

What you might encounter at the higher resolution is macroblocks, the really annoying squares caused by a bitrate that's too low for the resolution. The BP/F figure is only a guide and not a real way to tell the compressibility of the movie. Since FairUse has no way to do a compressiblilty test, the only way to know which you'll like better is by making AVIs at each resolution and comparing. And yes, the lower the resolution the softer the picture when full-screened.

[RabidDog]

You should also push the quality/speed slider hard over to the right, for better quality (DUH). this will help to alleviate any bitrate starvation. This can double or even triple the time taken, but on any modern PC (C2D+) should still be within reason. also for the same filesize and bitrate, compressing using x264 will give better quality!(25% 50%?) but is more compute intensive, eg it needs more cpu speed (and works across all cpu cores x2, x4 ,x6) even up to 52 possibly.
And if you just want a certain quality, use the quantizer option.(unknown filesize)
IMO 1100+ bitrate will give good results , depending on the movie, of course.