I've been searching for something similar. Quite a lot of people probably use a dedicated bit of software for this, but I think SUPER is probably a better solution because it's more flexible. Part of the problem is that it depends on what videos you've got to start with (e.g. there isn't much point in saving a tiny blurry video with better resolution and bandwidth to display on your phone screen).
There are a few options. The container needs to be MP4. I've got it working fine using the H.264/AVC video codec and AAC LC for audio. I note that the S2 saves video it records by default using the MPEG-4 codec. I don't have an in depth knowledge but my understanding is that H.264 gets better quality compression but uses more processor power (hence is more battery hungry) than MPEG-4 so you'll have to decide whether you want more space or more battery life.
The S2 should be able to decode most size and bitrate settings. The S2 screen is 800x480 pixels, which is similar to standard def TV. Recorded video is 720x480 at ~29.3 fps if you want to follow that.
One thing to consider is if you want to plug your S2 into the TV using an HDMI adapter, then you'll probably need a significantly higher bitrate and resolution than on the phone itself to avoid it looking terrible.
I suggest that you just have a play around and see what works best with you! Perhaps you could post your findings back here afterwards so that everyone can benefit.
I did notice a much older post on the web for a different android phone, although I can't include the link for spam reasons! Google 'best quality video encoder settings for android' and you should find it. I would suggest using these settings as a starting point and trying different things from there.