From the TDP point-of-view, the 2500T is a good candidate. I forgot to say, another reason I recommended the G620 is because it's about half the price of the i3-2100. That's what swung it for me!
In terms of creating ISOs, I actually rip my DVDs to the folder format as TMT 5 reads these fine. However, I've done this on my old HTPC (i5-760...don't ask), my new one (G620), my gaming rig (i5-2500K), my old laptop (Acer 6930G) and my (very) old gaming rig (single-core Athlon). I didn't notice an appreciable difference in the ripping process across these machines. Bear in mind that DVD ripping, once the copy-protection is defeated, is just copying data...it won't tax a modern CPU in the way transcoding does. Also, how the CPU is used will depend on the software you use to rip the DVD. If you've got a quad-core CPU and the software is written to only use two cores, then those other two cores on your quad-core chip are effectively wasted for that task. As that's one of the criteria you're using to choose your CPU, it's worth thinking about. Oh, I use DVDFab and DVDShrink.
I don't know for sure if 2 drives would saturate a G620, but I highly doubt it. The time it takes to rip two disks simultaneously might be slightly longer than it takes to rip one by itself, but it would be quicker to dual-rip than use a single drive twice for two seperate DVDs (if you understand what I mean...?) At the end of the day, 700 DVDs is going to take you a long time...but you're only going to go through that process once (do yourself a favour and back up!!) Once that's done and you're ripping as you buy, you'll probably not be caring too much about the CPU inside your HTPC.
Hope this all helps...I've pasted in my HTPC specs for your info. It's got a small HDD as I have a WHS box in a cupboard where I store all my media:
Motherboard: Asus P8H61-I
CPU: Pentium G620
CPU Cooler: Stock
Memory: 2x2GB Corsair DDR3 (9-9-9-24)
PSU: Silverstone 500W Modular
SSD: 60GB Corsair Nova
HDD: None
Graphics: Asus HD 6450
Case: Silverstone Grandia GD06B (Black)
Optical: Samsung Bluray Reader
OS: Windows 7 Home Premium (x64)