Here are some settings I use when I create *.avi files:


Video CODEC: Microsoft MPEG-4 v3 (I have found it to be most compatable with windows media player 7 and up without installing more CODECS)
Audio CODEC: MP3 (Any will do)
Always keep the framerate the same as the input video.

Low speed internet:
4:3 - (Video) 160x128 @ 80kbps
- (Audio) 22.05kHz @ 40kbps Stereo
16:9 - (Video) 160x96 @ 80kbps
- (Audio) 22.05kHz @ 40kbps Stereo
2.35:1 - (Video) 160x64 @ 80kbps
- (Audio) 22.05kHz @ 40kbps Stereo


Hi speed internet:
4:3 - (Video) 240x176 @ 160kbps
- (Audio) 22.05kHz @ 40kbps Stereo
16:9 - (Video) 240x128 @ 160kbps
- (Audio) 22.05kHz @ 40kbps Stereo
2.35:1 - (Video) 240x96 @ 160kbps
- (Audio) 22.05kHz @ 40kbps Stereo


Archival:
4:3 - (Video) 320x240 @ 320kbps
- (Audio) 44.1kHz @ 160kbps Stereo
16:9 - (Video) 320x176 @ 320kbps
- (Audio) 44.1kHz @ 160kbps Stereo
2.35:1 - (Video) 320x144 @ 320kbps
- (Audio) 44.1kHz @ 160kbps Stereo


PS: feel free to comment on my settings with any suggestions.