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We have bought one of those small mp3 players with video which play AMV  semi format. It's a S1MP3 device .
Dependence on Windows suck, but you can pull few tricks by recoding your various formats into correct resolution before encoding them:
ffmpeg -i source.avi -s 160x120 -r 16 -acodec copy /tmp/test.avi

Here is alternative using mencoder
mencoder -o /tmp/test.avi -ovc lavc -vf scale=160:120 -ofps 16 -oac copy source.avi

This way ffmpeg will scale video to superb quality and AVM Transform.exe won't choke on them.
Following is content of transformsetup.ini to use native player's resoltion:
[Setup]
Overwrite=TRUE
Insertwave=TRUE
Insertpic=FALSE
Transplay=TRUE
Trycode=FALSE
VFBS=high
VWH=160*120