If you want to get the best quality/size ratio try the new Xvid codec, it needs a program like VdubMod to run it there both free. They wont give the perfect setup straight off, that will take a bit of experinenting. The program I really like mainly because it's really idiot proof and gives a bunch of quality/file sixe options. It's Dr.Divx theres a free trial of it at
www.divx.com it comes with the newest divx 5++ with it. With divx I get very good quality with 700+ - bit rates and 320x240 with settings like that I can compress a complete DVD down to a size that will fit an a CD and its very hard to tell the difference between the 2.
I find the wmv codec to never quite match the divx and the divx file will always be smaller than the wmv. Something about wnv if you dont use a super high bit rate it looks hazy and blurry... Even windows media site has new Hi-Def video samples to check out... geezus the dam files are massive with the 2-3mbs 720x1040 res!! 250mb+ for a vid that run 2.3 minutes! Another bad part of such hi bit rates many comps just dont have the bandwidth to handle that much data flow... it can be really choppy if your system cant hack it.
Check out
www.doom9.org they have good info on how to get the best compression/quality out just about any combo of encoders plus all the files are there too and most are free.