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MPEG files are already heavily compressed. Why would you want to compress them further? If you are starting with MPEG files, leave them alone. They aren't going to be able to make them much smaller in file size, although you may get away with making a smaller frame size if necessary, eg 640x480 to 320x240 and saving a little file size that way, but you will lose a little quality in the process.
If you are starting with DV video you can encode to MPEG with any number of software tools like Cleaner XL, Sorenson Squeeze, VideoCharge etc.
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