Encoders do get better. Perhaps in a few months, when and if this conversion gets popular, folks will code better and more optimized encoders. In the last 6 months we have seen a lot better encode speeds on the same hardware out of H.264 stuff. Perhaps the 3.5 will go to 3 hours HA!
I don't think I want to take the "fool's" route right now. 3.5 or 13 hours seems like a long time.
If a "fool" has access to a bunch of systems, perhaps VisualHub and Xgrid might help.
Right now it seems that the conversion is rough. Does anyone know where we could download a small TS clip to play with?