That doesnt require you to pay, or that isnt a trojan, or that doesnt require the use of 15 other applications, and that keeps the sound intact???

virtual dub apparently.

An avi file is just a container. Whether it can be compressed or not depends on what type of video is contained inside it.

And yes, Virtualdub is the tool to use, though Id go for VirtualdubMod, as it has some extra stuff, like supporting mpeg videos and such.

To find out information about a video file, use Gspot.

Oh, and a good place to look for any video encoding help is http://www.doom9.org. Theyre especially good on the forums.