You can usually compress the video with very little perceivable loss in quality (I usually select "Compress to %: 25" and I notice absolutely no loss) without too much trouble, just time. But the sound doesn't come through.
To remedy this, download the latest version of QuickTime, just in case. Bink apparently uses their audio codec.
After that's all downloaded and installed, go back to Bink and Smacker, press the "Bink It!" button, and select any kind of video compression you want. (I'll tell you exactly what settings I use at the end, as an example.)
Next, click "Compress Audio", go to "Compress Level", and add 100 to whatever the value is currently there. Usually, the final value is going to be 104 (4 + 100). Then, select "16-bit/Stereo".
Now, here's a little example of my settings that work WITH SOUND on the XBox:
Overall data rate settings:
Compress to %: 25
Keep peak data rate under a:
multiple of the overall data rate: 3.0
How many frames to preview: 2
Compress Audio CHECKED
Compress Level: 104
Convert to what sound format: 16-bit/stereo
There you go! Happy downsampling of your backups!