1.) The PS3 upscales almost everything. .vob, .mpg, .avi, .mp4, what have you. That is, of course, if you have the Upscaler turned on.
2.) Also, there are plenty of free programs that will convert from DVD's .vob format to .avi or .mp4 or .m2ts.
Me, I prefer to simply rip the DVD to a hard drive and watching it that way. If you want to save up on space, though, I'd use MeGUI + AviSynth to do your encoding, if only because it allows you complete freedom in encode settings. There are others that are much easier to use, but I find that they don't produce the level of quality that I want.
And by quick and easy, he means it takes seconds to "convert" the main movie, with audio, and another few seconds to copy it over to the external hard drive/NAS.