I personally prefer DivX/XviD videos or WMV because usually the resulting file size is much smaller compared with MPG and the video quality is better overall.
I understand WMV sucks for mac users and AVI for people without codes is a pain. RM is usually a problem for most people.
Like Surfn said, most paysites have multiple video formats available, not just MPG or WMV. No matter how much I personally might love MPG, there'll be someone that hates it with a passion, and vice versa.
Bitrate depends on each video, but just make sure you use VBR instead of CBR... As Wazza said, if the video doesn't pixellate at full screen and if the video plays smoothly (29 FPS) then that's what you want to go for.
I would not decide on a bitrate first then adjust resolution/fps around it
There's one highly-acclaimed video site with 480x360 res and ~1500kbps WMV videos but their framerate is 23.9 and as a result, their videos are pretty much unwatchable.
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