What I do is encode using FairUse LE to get the 700MB file. Then I use PocketDivxEncoder to size down the file for my pocket pc. Which comes to less then 250MB depending how good of a quality you want.
http://divx.ppccool.com/
The FairUse LE is free to use but limits its output to 700MB files so you would require the PocketDivxEncoder to be used.
Your other option is to purchase FairUse which I believe allows you to determine the size of the file output.