Custom settings for iPod Touch

[hallway]

I just made a mobile version of the new HP movie and using the default setting for iPod Touch's, the file is 1.7gb. Granted, the movie itself is 2-1/2 hours long.

How can I get smaller files or what's the "better" option, lower resolution or lower bitrate ? I haven't delved into the "custom" settings yet.

[hallway]

Okay, instead of asking about "custom" settings, I'll just use the default, pre-defined ones. That said, my kids will now have an iPod Touch and an iPod Nano for Christmas (older one gets the Touch, younger one the Nano).

What are other's favorite settings for these devices ? If I read the 'tech specs' right at Apple's site, they appear to support the same playback options/settings. If so, that will save me the trouble of making multiple versions.

And regarding the widescreen settings, that applies to the source or the playback ?