Check this out.. This guy really knows his encoding... Using H.264 and the new audio compressor AAC, he encoded it at 320x200, the video is ONLY 100Kbit/s and the audio is only 24 Kbit/s..
http://www.flashvideofactory.com/blog.htm#230208
Been trying to use H.264 (you can get the library x264 compiled into ffmpeg) but it's crashing on WinCrap right now...