I thought I'd mention this nice link if you haven't seen it. Theora, when encoded with a newer Theora (Thunelsda) encoder, should at least match “MPEG-4” (in quotes, because I don't want to mention specific profiles, and get into a pissing contest).
Monty's been working on Theora and Vorbis quite a bit, and I'm pretty sure he would admit that the Theora of past didn't do justice to the capabilities of the codec.
Have fun with the surround sound work in Vorbis too :)