What version are you using?
(What sux is that each version has all the menus in different places, and some of the same commands have different names... uggh.)
First, if you don't have Xvid compressor, go to doom9.org and get the codec & install it.
a. In ver 1.6.6 (this might work on other versions, just that some commands hide elsewhere) start VirtualDub and drag-n-drop your large file onto the grey area.
b. In 'Audio' menu, select 'Full Processing Mode.' I'll leave off audio compression for now (the AMV player system I use is fast enough to play uncompressed audio anyways. If other folks want to post here about audio compression, that'd be even better.)
c. In Video, select 'Compression' and a new box opens up. Scroll to 'Xvid' and select that. (If for some reason you don't see an Xvid option, try 'Microsoft mpeg 4 Video Codec V2' More on that codec below. (skip to letter 'j')
d. In Xvid you will do a TWO-PASS conversion. So click the Xvid codec and then click the 'Configure' button. For 'Encoding Type' select .Twopass - 1st Pass, then click 'OK' and exit. This drops you back to the 'Select video compression' box you opened in 'c' above, and so 'OK' /exit that one as well.
e. Go to 'File' and hit 'Save as AVI.' Navigate to where you want the new file to end up, and type in your new filename. Include the .avi extension in the filename. Now - BEFORE YOU CLOSE THIS BOX - look for a teeny checkbox labeled 'Don't run this job now; add it to Job Control so I can run it in batch mode.' CHECK THAT BOX.
f. NOW hit 'OK.'
g. We will now configure your second pass. Go to Video -> Compression and click Xvid again, the Configure button again, and in the new box for 'Encoding Type' select 'Twopass - 2nd Pass.' Your AMV is 4min 13sec long, so at 25MB/min it should around 106MB as a target size. So type in '106000.' OPTION: Click the Target Size button and it toggles to Target Bitrate, and you can try anywhere between 1600 and 2000 kbits/sec. Click 'OK' and exit, then exit the compressor box with another 'OK.'
h. Go BACK to File-> Save as AVI and save the file to the SAME place and the SAME file name. You might get an 'Overwrite the file?...' Yes/No complainer and hit 'Yes.' Now go to File -> Job Control and another box opens up. Hit the 'Start' button and you can watch your first pass and second pass execute. The time turns to 'Done' when the pass is complete, so go for a walk, read e-mails or do something else. (MAKE YOUR NEXT AMV!!!!) When it's done you will have a reasonably-sized avi file. Test it in your favorite player. I use VLC for the AMV shows. YOU DID IT!
(there is no letter 'i')
j. Microsoft MPEG-4 V2 codec is a one-pass encoder that work barely decently. It's not horrible.
In this case, don't run a batch mode (like the two pass / Job Control thing above) we will save it directly in one pass. At Video -> Compression select 'Microsoft mpeg 4 Video Codec V2.' A new box opens up. Select keyframes every '2' seconds, slide 'Compression Control' to the right to at least 96, and slide the Target Bit Rate to between 1700 and 2000 kbps. Click 'OK.'
k. Go to File -> 'Save as AVI' and navigate to where you want to save the new file, Do *NOT* check the teeny Job Control checkbox - make sure it is NOT CHECKED. Then type your file name and click OK. You can watch VirtualDub crunch frame after frame, or go off and do something else. You get a little progress box which predicts Total time, and shows Elapsed Time. Subtract Elapsed from Total in your head and you can guess how many minute it will take to complete.
THAT SHOULD DO IT - GOOD LUCK.
Comments and corrections welcome!