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Open the movie.
Select the start keyframe then press HOME. Select the end keyframe and press END.
Then go to Video menu from the top and choose "compression." Pick your codec, such as MPEG-4 V2, by highlighting it.
Click congifure. Select the crispness and Data Rate. I usually use something like 75 and 900, respectively.
Click OK. Then choose File, Save As Avi... then I'm done.
Edit: You also should choose to compress the audio as well, as opposed to direct stream copy the audio. If I compress Video I always choose to compress audio as well. I'm not an expert but this works well for me.
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