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Smaller files will always look better than larger ones. I wouldn't worry about the perceived difference between the two formats at the low quality end of the scale, I would just try and make any of the formats you need better at the size and bitrates you want.
500 Kb for video is a pretty low bitrate. I like to use a very slight sharpen and brightening filter on most of my wmv and other encodes in Cleaner XL for example. It makes the end product quite a bit more pleasing to the eye.
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