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It won't make any difference at that resolution, without hardware acceleration PDAs are simply not fast enough to decode AVC at 640x480. Even at QVGA resolution videos with a lot of on-screen movement drop a few frames.
IMHO if you weigh up the quality improvement/space saving versus the extra power required to decode AVC then Divx/XviD with AAC audio is still the most practical format - for my money anyway.
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