Since Quicktime supports Applescript, my initial suggestion would be to make a drop folder with an applescript attached that performs the encoding, or if you are using OSX Tiger, create an Automator workflow that does the same.
The settings you will need to use are available in this article written for processing DVD content for the new iPod.
http://diveintomark.org/howto/ipod-dvd-ripping-guide/
The file format must be MP4, using the AVC/H.264 Video / AAC Audio, with the audio sample rate to 48000Hz, with a suggested bitrate of 128kbps or higher (higher bitrate = bigger files, and is only worth it if you have decent quality audio to being with - check the original audio in the AVI to begin with).
SCREEN SIZE (Important) - should be 320pixels wide MAX. Make sure you are constraining proportions so the screen height scales down appropriately.
Then process your AVI's.
Run iTunes. Find the .mp4 file that you created and drag it into your iTunes library, or select Add to Library... from the File menu and select the encoded movie.
<All these instructions are retrofitted from the guide at
http://diveintomark.org/howto/ipod-dvd-ripping-guide/ >