If you have an AVI video file that you need to shrink, then you should re-encode it or degrade the quality of the AVI video.
But you have a few options that don’t require you encode the WHOLE video. All options use VirtualDubMod.
First, you can re-encode the audio. In VirtualdubMOD, go into Streams -> Stream List. If it’s an AC3 or MP3 audio file, you can demux that to wherever and encode it. For AC3, I use Besweet to transform it into a WAV format. If it’s 48 kHz be sure to downconvert to 44.1 kHz. The difference in quality isn’t noticeable and 44.1 kHz compresses a lot better than 48 kHz. For MP3, I just use DBpoweramp to convert to WAV. Since I just about always use Ogg audio for my encodes, I use Oggdrop XPd for my Ogg encoder.
Second, you can go to the beginning or end of the file and trim off a little bit. You can do this through search BY KEYFRAME (you will see some buttons that have little yellow keys). You cannot just trim however many frames you want. You can only slice off by keyframe.
Lastly, you can dump the AVI container and use an MP4 or MKV container. VirtualdubMOD can use the MKV container (my personal preference) and that will shave off a meg or two. If you use MKV, you can use AAC or Ogg audio (I prefer Ogg) and you can use AAC audio in MP4.
If you think VirtualdubMOD is too complicated, you can try t@b ZS4 Video Editor and it is free.