Well, I'm using Final Cut Pro 4 so this may not apply and is certainly not the best method. I export my final amv using conversion to a DV stream. The settings I use are DV NTSC with 44.1 mhz and 4:3.
I then take the resulting dv file and convert it using Dvolution to an .avi file (settings I use are 720x480, 1100 for the video bitrate, 192 for the audio, 2 pass encoding).
I'm not sure why you're not getting your audio. Someone else will surely post here with advice more applicable to your situation ...
Oh, and I haven't figured out how to compress the video afterwards but I have noticed that playing it in Quicktime vs VLC shows a different quality.
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