If you've got a program that can read encrypted DVDs then it's certainly possible to copy the files and folders just as they are to a flash drive, and most of the DVD player software packages I've seen will play from a disk or flash drive just as easily as from an actual DVD.
There are programs that compress DVD files to save space, but at the expense of video quality. Without compression, a commercial DVD can use up to about 9GB (or a little more) of space. "Flipper" DVDs, if they're dual-layer as well as dual-sided, can use up to about 18GB of space (but these are quite rare).
If you find that you cannot burn the DVD to a flash drive, and yours and your son's computers are networked (and in the same WORKGROUP), you may be able to enable sharing on your DVD drive. Insert the dvd to your computer and let him access it through your home network via his DVD software.
Yes. I use DVDRipper from Aimersoft to rip DVDs and it gives many formats (like 30+) to choose from as far as output. I rip all of my 2 year old's stuff so that we can watch them without him wanting to play with the actual DVDs and we don't have to worry about storing all of them in our entertainment center.
I've also moved them to a pda and my HTC Tilt with no problems.