Some swear by QuickTime others by Windows Media (my personal favorite). The smallest file size is not always the "best" size for any given video. All too often what happens is the image quality is diminished. I would suggest you simply play around and experiment with the various compression settings. Use just a small clip (maybe five seconds) to save time. Compress it to the point you don't like the results, then back up to the previous settings (keep notes). This will provide you with more knowledge than information and you'll learn first-hand what's best for you.
when you take the standard dv 720x480 and make square pixles out of it, you end up with a 640x480 picture size... you have to make the pixels square, because that is the aspect ratio that computer monitors use.
you can then downsize to even multiples of that... 320x240, for instance, but there are tradeoffs in pq when you start to do that.
windows media has the best pq vs. player penetration on the 'net, by far... nothing else comes close.