Well hard drive space is cheap....or just burn movies you want to keep to DVDR.
Regarding formats.... DIVX/XVID are compressed video MPEG4 variants... offer near DVD quality for about 1/8 the size.
Not sure about DTS, but can keep dolby AC3 audio from DVD or convert to other format.
Another growing format is H264 codec using AAC for audio... even smaller size. Just do a search.
Lots of converters out there.