Below is a script one can use to do the encoding. Put the text below into a batch file on Windows XP and drop the difficult video file on it. It will scale the video so that the maximum width is 720.
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INPUT=$1
OUTPUT=$2
mplayer "$INPUT" -ao pcm:fast:file=audio.wav -vc null -vo null
mencoder "$INPUT" \
-ffourcc divx \
-ovc lavc -lavcopts vcodec=mpeg4:vhq:vbitrate=1300 \
-audiofile audio.wav \
-oac mp3lame -lameopts vbr=3 \
-slang eng \
-sws 2 -vf scale=720:-3 \
-o "$OUTPUT"
rm -f audio.wav
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