I would definitely choose h.264 as the video codec, the bitrate depending on you own considerations of size vs quality. I find a max of 5000kbps more than adequate but its a personal preference. Also it depends how you will be streaming the file, anything over 8000-9000kbps could be a problem over wireless.
For the audio codec I would choose dolby for 5.1 sound, mainly because my system wont play aac 5.1. If its stereo then you can go for aac, its more efficient.
My preferred container is MKV as it supports internal text subtitles. You can choose mp4 container but I think you are restricted to aac audio and external subtitles.
It appears you can do this with the program you have.
(EDIT: on looking closer at the program specs it appears it doesn’t support dolby digital so you may be restricted to aac audio)
