I was doing the same thing long time back until I found an easy-to-use application having great user interface supporting many input as well as output video files and the best of all, it comes FREE!!
I have been using Xvid4PSP by Winnydows, that does not only match many iPod families (iPod classic, iPod nano, iPod touch), iPhone or PSP really well but also goes with Blackberry, iRiver yet Microsoft's XBox 360. It supports almost all of media file extension and even you can attach subtitles files as well. It is able to convert avi to mp4, avi to mpeg, wmv to mp4, flv to mp4, you name it :)
Xvid4PSP is download-able at this site. If you end up loving the application, I think you will be always welcomed to give donation to its developer ;)
