Reducing video file size

[SteveD]

I am in the process of converting some old home movies on VHS video cassettes to files which can be viewed on a PC. I am using ion Video 2 PC hardware with Cyberlink Power Director 8 (supplied by ion). A 3-hour video tape ends up as an .mpg file of 10 GB or more. Could someone please suggest a way of reducing the file size without losing too much quality or ending up with an unacceptably small image on the screen? I have AVS Video Converter 7.1, my PC's operating system is Windows 7 so I also have Windows Live Movie Maker.

Thanks

[AlBags]

Encode to Home Theatre profile (avi/divx) 2-pass if poss. Then they will also play on many dvd players as data.
If you encode as mpg, they will be ruddy big .. as you discovered.

[SteveD]

Thanks.
In the Quality Profile Setup of Power Director, the following are offered:

MPEG-1 (VCD HQ)
MPEG-2 (DVD HQ; DVD HQ (Fast); DVD SP; DVD LP; SVCD HQ; SVCD HQ (Fast))
AVI (AVI Long Play Profile; AVI High Speed Profile; AVI High Quality Profile)

I have been using MPEG-2 DVD HQ (which is what Power Director defaulted to). Which of the AVI settings would you recommend trying?

In Capture Preferences it is possible to set a size limit but I have no idea of what that should be. I have not been able to find a tutorial for Cyberlink Power Director.