Try SD MPEG 4 at 4,000kbs. Thats what I use and it produces some very nice results. That said, if anyone knows a better setting still, I'm all ears.
Here's a test file I've put up from my camcorder for you at those settings (my other vids were in low light so not a true representation):
http://www.youtube.com/watch?v=XRKUwLcV_GE&fmt=18