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I've been using flash movies inside of a blog and have had good luck with it. One nice thing is that you can put a player inline that the vast majority of surfers can actually use inline. Its a very compatable and easy to use format. I can even watch flash video on my slightly geeked out mobile phone.
Size... You really shouldn't see much higher or lower quality at a given data rate compared to other modern video formats. BUT, you might find lower quality encoding a wmv, mov etc into flv at near the same datarate. Remember that wmv, h.264, etc codecs are not intended to edit, they are highly compressed formats for end users. This is sort of like editing a jpg, you loose quality, but you loose it a lot faster than with a high quality jpg because there is so much more compression.
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