Learn how to re-encode the movies with VirtualDub using Divx or Xvid until they are small enough. There are tutorials online as to how to do this, I'm not going to go into it here because it is kind of complicated. You should also resize the videos to 320x240 in VirtualDub, and maybe do some cropping or letterboxing so that you don't mess up the aspect ratio (if it's different to the usual).
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