Need more info for what the video is being used for?  If it's just to go up on youtube, remember that youtube degrades quality significantly anyway so you don't need to start with anything crazy.

Generally, without knowing what you want it for.  If it's for computer viewing, use divx/xvid compression and use one of their presets (ie. medium or high quality).  If it's for a DVD or to watch on a TV/Screen, I generally always do an uncompressed avi file, it's worth it to have no or little pixelation.