Halo.
It is your lick that I have met you. I mean, your luck.
My name is Meat Pao, first son of Kaya Pao and Redbean Pao.
I am a video enthusiast. Nice to meat you.
According to independent reviews by two respectable video-enthusiast communities, the best is H.264 codec, as of now.
H.264 is implemented best by x264.
X264 can be ported and used within VirtualDubMod environment, through the VFW version, since VirtualDubMod uses VFW.
It can be obtained freely here:
deaththesheep.uni.ccwah no need so formal ba

Please also read the manual on that website, it will teach you how to optimize the settings.
For further reference you can check
www.doom9.org on the codec comparisons, or also
www.compression.ru which has useful additional filters as well as comparisons.
Personally I use x264 myself.
Meat Pao.