hmm... I don't know enough about windows media encoder I'm afraid... it certainly should work for your purpose. The other route (which I'm much more familiar with) is the xvid/divx route - install the latest xvid binaries (google: koepi xvid binaries - latest RC is 1.0rc4 i think), pop pocketmvp with the divx.dll update (see the thread in this forum "which is the latest version of pocket mvp?" for the links) on your axim...
load up the avi/mpeg in virtualdubmod (free, google

), add some video filters (suggest rotate 90 degrees left, bicubic resize to 240x320 for full screen landscape video - though with an x5 basic you may be better skipping the rotate and doing a 240x180 encode for a full-width portrait version - test it out see what works best), select video-> compression and then xvid -> configure -> single pass encode, bitrate around 200-250kbps, keep everything else at default for now...
select streams -> streamlist, check your audio stream is there, right click it and select "full processing mode", right click it again and select "compression", select mp3 at 64 or 96kbps (you'll need an mp3 codec installed - i've had good success on my axim with Lame)...
Finally, click file -> save as... and pop in a file name to save it to and sit back while it does its transcoding. sounds long winded but isn't anywhere near as bad as it sounds
