Best format copy VHS movies.

I am currently trying to copy all my old VHS movies onto my hard drive so I can get rid of the tapes.
I have figured out how to connect my old VCR to my computer. I have figured out how to capture the movie into FCE. Now when I save the file using the default quicktime settings the file is 4 gig! What would be a better way to export this so that I can stay under 1 gig per movie?
thanks

Here is my desired sequence of operation.
1. Remove VHS copy of Matrix from shelf.
2. Capture Matrix into FCE.
3. Export Matrix to a file under 1 Gig that still has reasonable quality.
4. Copy exported Matrix to my super huge media hard drive.
5. Give VHS copy of Matrix to Goodwill.
6. Repeat above steps with Gladiator, Ronin, Pulp Fiction, Blade Runner. etc...
7. When video storage shelf is empty, give it to Goodwill.
8. 5 months from now, get steak, watch Matrix from my hard drive.
I see there are devices that come with software that allow you to do this operation. But I would have to pay for them, and I already own all the equipment to capture the VHS into FCE. The reason I don't want real DVD's is I then have to store them in a physical location which defeats the exercise of removing stuff from my extremely small apartment.
So is there a way to take a 90 minute DV file, export it using quicktime conversion, and end up with a file of reasonable quality under 1 gig.
For reference I do not have a high def tv... in fact I am giving my old 21" tube tv to Goodwill as well. I dont watch TV I am not spoiled by extremely sharp movies. Chances are I will be drinking some whisky while watch the movies so if it is not super amazing quality I really dont care.
thanks

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