If you don't mind the files being converted to .wmv format, Windows Movie Maker 2 (available at microsoft.com) has some really flexible compression settings. You can import your avi, then save it again and it lets you pick the exact file size you want the video to be (Sounds like what you were talking about with the other program). It does a great job of keeping the quality too, for the most part. I was able to bring a 12 meg, 3 minute video (with audio) down to 1.9 megs and still retain decent video quality...Audio was another story though.
It would only be practical for shorter clips though, because it takes some time for it to import your clip. Plus you can only save as .wmv (if I remember correctly).
Probably not quite what you were looking for, but I thought it was worth mentioning
