The filesize usually gets smaller but if the original is already well compressed, the AMV conversion DOES sometimes get larger.
The reason is that AMV files must simplify encoding instructions to work on a slow, very low-powered CPU inside these fake iPods. Complex encoding instructions will overtask the simple CPU causing video to freeze.
Video is very processor intensive, so the tradeoff is more battery time and low cost and small size versus more complex decoding.
You can decrease the size somewhat and increase stability by first encoding with Pocket DivX Encoder (freeware) and then use AMV Converter as the final stage. See my 2-stage testing results at the link:
http://www.mympxplayer.com/viewtopic.php?t=548