The short answer is: you should aim for an average DRF of less than 4.

DRF, or quantization factor, is a measure of how much the video has been compressed. Compression artefacts start getting more noticeable and ugly with higher DRFs.

Achieving your target average DRF is a balance between file size (bitrate), resolution (don't forget to crop black borders) and compressibility of the source. I recommend you get DRF Analyzer and read the readme.

Are you aiming for a particular filesize? Remember you can also convert 5.1 AC3 into 2-channel MP3 to save space.