I understand what you are saying about using smaller rar's, but I think it's redundant when you consider that data on cds and dvds are stored in a given sector size (we all know about sbe's): 2048 bytes for cds and 2352 for dvds. Thus, you really only need to fix the bad sectors in a file, not the whole file regardless of whether it's a rar, flac, or vob file.
I use the following process when doing dvd backups... Make a dvd image (write it to the hard drive, not the dvd yet). Create a par2 recovery file of that image using some multiple of the dvd sector size. Burn the image to dvd. If the dvd goes bad, you can write the disk image back to disk ignoring the bad sectors (using IsoBuster or a similar program) and repair it with the par2 files.
I admit to not having actually tested the recovery process. I should scratch up a disk and restore the image.
My 2¢
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