@Rajanav
Try "Handbrake" or "Xvid4PSP", both are good for starters with pre-defined profiles. Decrease the "Video Bitrate" if need to reduce size & "Resolution" to match that bitrate.
If possible, mention actual "Resolution" & "Video Bitrate".
Hand brake (WinXP) - *handbrake.fr/rotation.php?file=HandBrake-0.9.3-Win_GUI.exe
Xvid4PSP (Windows all) - *www.winnydows.com/e107_files/downloads/XviD4PSP_5036_full.exe
Better to have latest . Net framework 3.5 installed.