The most important thing in this process is your bit rate for your audio and video. You can have different data rates for your audio and video. Our goal will be a one meg per minute movie, so a two-hour movie will fit on a 128 meg CF card. Here's how to calculate the size of your eventual video files. With a little extra for file overhead, that'll still fit comfortably on a 128M CF card.
Bit rate is all that matters.
These file formats use compression algorithms that you can set to different quality levels. Again, it's always a trade-off between file size and image quality. WMV video creates smaller files but with color bands, where swaths of similar colors are reduced to a single color to save file space. I prefer the mpeg-1 of Pocket TV, which creates slightly larger files without color bands but with a shimmering or blocky pixel effect at heavier compression. This is entirely a matter of personal taste.