Being an avid filmmaker, I was able to encode The Matrix at EXCELLENT, very watchable quality to 99 mb. I used PocketTV, though. The MPEG format is not as outstanding as the DIVX format, but it has a MUCH better player on the pocket PC. At high bitrates, your framerate will be terrible. Bump it wayyy down (say, 50-100 kps) and encode to 320x240 (the size of a PPC screen). Also bump the sound quality way down. If you wear headphones the sound will remina crystal clear if you do it right. It will tkae some effort, but you can use freeware programs (VirtualDub and TMPEGENC) to encode your movies to play at balzing speeds, high quality video and sound, on your PPC at a low cost of memory. You do not need a CF card that gargantuan; I have a 256 mb card and I can store just about everything on it.
Need more help? AIM Neszis.
EDIT: Dan, the problem is not in the size of the frame, it is surprisingly wholly in the bitrate. I encoded a 20 minute episode of Family Guy at 160x140 (half res) at 50 kbps, and then encoded a very similar length episode at 320x240. For some reason, I did not notice a drop in quality, but rather a gain in it (due to the doubled frame size). [2ND EDIT: I did not notice an increase in filesize.] I have a preset on TMPEGENC that encodes my videos this way every time. Works like a charm. Too bad Quicktime doesnt work that way on desktops

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3RD EDIT: Sorry if that was too pretentious. I was just pointing out my experiences with it.
~Neszis~