It depends...
If you want to re-edit, then it may be best starting with a format better for this (with typically poor compression).
If you might want to play them on a standalone DVD, then you could save re-encoding time by going to a compatible format (VideoCD compatible MPEG1, or if you have an SVCD capable player, SVCD compatible MPEG2).
If you want the best compression with acceptable quality, then it's DivX or Xvid - but don't expect to play those formats on a lower powered machine.