Danny144,
some points here for you:
1. If you screen is 2.2 then you can't play 320x240, it must be 224x176 or 176x220...
2. You say that your videos are 176x220 then your screen handles videos turned 270°... have no sense to convert a video to 176x220 WITHOUT turning it -90° or 270° whatever option.
3. To solve your problem you have to use a special version of AVIconverter
here; AVIConverter turned
I think this will work fine for you.
No other converter turns -90° and handles mp2, only this one.
greetz