I am shooting from the hip as far a space required for a 40 min to 1GB at what bit rate calculations is concerned. (GOP size is also a factor, typically 15, but could also be 12 etc.)
I have found that a CBR of 4 with a GOP of 15 comes out to about 3.8GB for 2hrs.
If you are going to go down to 3.5 you will want to do 2 Pass(for quality), and if you have the control of max rate you will need to bring it down close to 3.5.
Good Luck
Jim Cunningham