By doing this, aren't you trading the 'on demand' conversion benefits for resourcing, for guaranteed disk space usage to store the secondary copy +plus+ the compute resources to do the bulk conversion in the first place?
While I realize this won't answer your question on how to do that, wouldn't it be significantly easier to just let it transcode on the fly?
In any event, wouldn't the:
Limit remote stream bitrate
Set the maximum bitrate of a remote stream from this server.
Setting do the job? I have an option for 4mbps / 720p, which seems to be the setting you'd want?