How do you make videos you record smaller?

I recorded some stuff using the program Fraps, and when I try to edit them in windows movie maker, it ends up crashing because im editing a 500+mg file.
So, when I tried making it smaller using an encoder, it failed and it had some error talking about...

memory or something.
The encoder I used was a DivX encoder.

How can I get my videos smaller so I can edit them more?

I would use a program like Free video Converter, which is made by Koyote Soft and I've always had good results with. Convert it from a large file to a smaller file, such as .wmv.