I'm actually in the middle of doing this right now.
Step 1) Use DVD Decrypter
Step 2) Rip in IFO mode (under mode settings)
Step 3) Extract each segment separately
Step 4) Use a program called AutoGK to encode to .avi or whatever you want to use.
If you need any help, feel free to PM me or just post it here. I've done this many-a-times for backing up my 2pac DVD's and special features.