The simplest advice to give, is to get some codecs such as divx, xvid and the x264 codec. Then [tornado fang] around with bit rate/quality and other stuff until you're satisfied.
I'll try to find a certain link, which had shitload info about this. I'll let you know if I'll find it.
(However do try to exepriment on your own, just get the codecs, unless you already have them).