Video encoding/compressing

I’ve decided I need to do something to my video clips, because the 20 minutes or so of footage I have on my computer is taking up about 8 GB. And I have just under one GB of space left on the whooooole computer.

I tried the Windows Media 9 Encoder, which made it smaller, but it also distorted the clip by making the size something like 1200x720 instead of 720x480. And as far as I can tell, you can’t change that.
Then I tried Dr DivX, but unless I pay, the encoded film has the DivX watermark down in the corner, and I don’t want that in my movie.

So what other programs can I use to compress it?

You could always try THIS the Player Ceramu Suite. I’m not sure how well it works but you could give it a try.