You're using the "Windows Media MPEG-4 Video V3" codec.... you should try WMV8 or 9.... and cut the video size down to 480x360 or 320x240. They'll look much better. This is at the same bitrate as yours with much more movement, and much less blockiness:
http://www.michellelynn.com/promo/ML...shThong-02.wmv
EDIT: btw - I know the buffer is too long.... I grabbed it from the 20 minute full video and it kept the buffer size for that.