TV capture compression

I have recoreded a TV show in mpg (don't ask why, my capture card record in mpg). One episode is 1.2Go.

How can I reencode it in an .avi of 350Mo size without losing too much quality (similar quality to the usually torrented tv show). What would be a good software to do it and what would be the correct settings to have a good quality?

Thanks in advance

I take it you use Windows?

Get VirtualDub and XviD.

OK but what setting should I use for compression?

And I can use either Windows or Linux

http://www.divx-digest.com/

http://www.videohelp.com/
If you haven't been there allready. Should be the first place to check.