About that, I did a quick test converting captured LD footage in DV format to XviD format, the only thing I did to the LD footage was undo the 3:2 pulldown, the XviD was encoded at 100% image quality with each frame being a keyframe, had I gone ahead and encoded a 2 hour capture the avi would be an estimated 9-10gb in size, so it's perfectly possible to have a 2 hour 4.3gb XviD avi by having 1/2 or 1/3 the number of keyframes.
With default settings in XviD at 100% quality, I have never gotten much over 2.5 GB for a movie. Increasing the number of keyframes would certainly bring that up but that always seemed to me as though it was defeating the purpose of MPEG-4. Either way, your idea sounds interesting now that I have read more of this thread than just the initial post that I replied to last night.