Yes, you can lower the quality, but I wouldn't recommend that. I take my mpeg transport stream files, which are over 8 gig an hour and squeeze them with the divx converter built into Beyond TV. It takes an hour down to around 600MB with good good quality. It's not perfect like the HD stream, but very watchable.
You can buy the DivX suite for a reasonable price that included a converter. Featured | DivX.com