Yup, I make my own movies, takes a little extra effort.
Use virtualdub to pull the audio out of your movie, or some other tool if its not an avi.
Encode your audio with winlame! There is a tool out there to make mp3s look like wav files for virtualdub, Ill post it if you are interested. Make sure your xvid is the one from www.entware.com or joygp (not just any xvid)!
Works well for me, I size all of my movies with virtualdub at 320 *240,
and my audio is always mono, 11khz, 48kbps or lower. Winlame is awesome quality!!!
Also, I use decimate by 2 so fps is like 13 or so.
Mth411
Good luck