Update 07/22/2013 Windows Live Movie Maker has added new export options to this video editing program. It now exports to the .mp4 video format and to Apple and Android devices. Please check out the current post on this topic.
This is now a historical post that I guess I'll take down eventually. Or not.
I fought the battle and this is my testimony. This really was a PITA (explained in the video if you don't know what that
Here is a summary of the video:
Windows Live Movie Maker 2011 only saves and exports videos in the .wmv format. You will need to save the video and then use a video conversion software to change the video into .mp4.
To balance the size of the video file and quality you should use the custom settings.
Should a newbie try this?
Heck no. If you can afford one of the current versions of a video editing software please purchase and use it to produce native .mp4 videos.
Should an experience person try this? Only if they are stone broke and can't afford new software or upgrade to Windows 7 or Windows 8. If you can upgrade to the new OS then you can download and install the Windows Essentials software from the Windows Team Blog.