Devilm:
The DIVX or XVID mpeg4 encoding does a great job with producing higher video quality than the wmv. The good news is that you don't need Vegas to do it

. You can do it for FREE using VirtualDub.
Here's the general process:
(1) Use Windows Movie Maker to edit your video (e.g. arrange clips, trim clips, add sounds, music, etc.).
(2) Publish the movie as a complete uncompressed .AVI file using WMM.
(3) Load the .AVI into VirtualDub
(4) Encode the movie using the divx or xvid encoding in VirtualDub
The end result is that you will get a .AVI that is divx/xvid encoded. Of course you'll need the divx/xvid codecs for whatever media player you are using to play the movies but these are pretty standard to get from the Net.
Some key notes:
(1) You'll have to learn how to use VirtualDub. It's a really good tool and to use it for the above is pretty straightforward.
(2) You'll have to load up the divx/xvid codecs for VirtualDub to use for encoding. When you download the divx/xvid codecs they should install and be automatically available for VirtualDub.
(3) You'll have to learn how to set the divx/xvid encoding parameters to get the optimum image quality vs. file size etc. It's pretty technical. I'll see if I can dig up some links on tips for the right settings. It makes a big difference.
Tango, XO
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