You shouldn't rename files and expect them to work...
.vob is a container, just like .mov and .wmv. That means inside the file can be a number of file formats, with different encoding.
VLC is the best program out there when it comes to figuring out what's inside and showing it. Reaper isn't as intelligent yet, as video is fairly new. So in this case it tries to decode as an mpeg, but there's something else in there. It uses the decoders from VLC, but not the intelligence. I don't even know if Reaper could use that to select the proper codec.
Use a proper tool to transcode to .mpg. VLC can do that, but the interface is a little... euh... awkward. Look for "transcoding wizard" in the menu's.
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