Personally, I love Dropbox. I had tried many of the free services, such as TransferBigFiles, and a couple of others. They were sometimes fast, sometimes slow; as a result, unreliable.
I tried out the 2GB free Dropbox account, and found it simple to use, and simple for my clients to understand. I could set up folders so that only certain clients had access to their folders, and certain people within that company. I now have a 50GB account, and it's only a hundred bucks a year.
As far as encoding, after my master is done in Premiere, or AE, usually at 1920 x 1080, I will output that uncompressed. Then I encoded Quicktime movies at 640 x 360 for approval. Since this is the size that many of my clients end up using on their websites, it's perfect for approval. They don't see something that's better than the final delivery encoding. After changes/approvals, I deliver the final files via Dropbox as well, usually sending .flv and H.264 files. Works great for me! I haven't sent out a DVD in over a year!
Joe Bourke
Owner/Creative Director
Bourke Media
http://www.bourkemedia.com