Harmy said:

OK, I have a technical question - what do you guys think is the best way to convert the BD's m2ts video to lossless AVI and at the same time resize it to 720p?

Avisynth with ResampleHQ. It does gamma-aware downscaling (in linear colorspace), so you won't have color errors in shots with very high contrast.

http://int64.org/projects/resamplehq/

The best kernel and chroma_kernel for this kind of work is Spline36.

If it were me, I'd hack-up the Avisynth script and render with FFmpeg. I'm always available to help. Drop me a line if you're interested.

JEDIT: Just making sure... this is downscaling from 1080p, right?