So you've got an iPad with an "HD" 1024x768-pixel screen and a boatload of video files on your computer. You're ready to get some serious video watching done. I can make that happen.
Should I Transcode My Videos? If they're over 720p, you'll have to. The iPad can't play back anything with higher resolution - iTunes won't even let you copy it over.
If you watch content in widescreen and want to maximise storage, you can save some disk space by using an application like Handbrake to transcode your videos into the largest 16:9 resolution the iPad's XGA screen natively supports: 1024 by 576 pixels.
That'll save you roughly - and I do mean "roughly", since video compression has a lot of factors - 36 per cent of storage per file, since you're encoding a video that has 36 per cent less pixels than 720p.
If you're transcoding a 2.35:1 movie, you can take it all the way down to 1024 by 436 pixels - a noticeable drop in quality.
In Handbrake there is a preset in the right-hand drawer under the "Apple" section called "Universal" that is slightly less resolution than what I've recommended above (720 by 400 for a 16:9 video) but will play back just fine on both iPads and iPhones. It's a nice sweet spot if you just want one set of files.
Oh! You all know the iPad can only play back H.264 MPEG4 (.mp4) files, right? Don't even both trying anything else. No big deal, though. That's most software's default setting these days, including Handbrake.
If you zoom in to fullscreen instead of widescreen, I wouldn't worry about cropping and transcoding. You could do it to save some space, but it's probably not worth the effort.
If space isn't at a premium for you, however, I'd just make sure that everything you want to watch is 720p (1280 by 720 pixels) or lower resolution and call it a day.
There is also an checkbox in the "Summary" tab of your iPad device menu in iTunes labelled "Prefer standard definition videos" which to the best of knowledge will copy the SD version of video files to your iPad even if a HD version is available. I would suspect, however, that this only works for content purchased from iTunes, which I rarely do, so you're going to have to deal with me not giving you an authoritative answer.
Or you could not load your video onto your iPad at all and just stream it from your network device or PC using Air Video, the $4 app that I adore. Its authors have already submitted an iPad update to iTunes which looks fantastic.