Video and audio latency from 6 seconds to 4 seconds

Hello,
I have developed a video transmission and viewing application . I am facing a problem of one way video latency of about 6 seconds.
Adobe says that the latency can be reduced to about 3 seconds one way. I have set up the buffertime for transmitter about 3 seconds.
Please can  anyone suggest me how to reduce the latency from 6 seconds to about 3 seconds ??
I have no issues regarding the bandwidth , but can anyone suggest the proper optimization technique for CPU and memory usage .
What should be the ideal configuration for minimum latency. 
Currently my audio and video  transmission one way is 6 sec and hence 2 way for both is 12 -14 sec.
Kindly guide me how to resolve the problem.
Thanks,
Chinmay Chitale

phosphene
followed your instructions and as soon as I tick "multiplexed Mpeg-1/layer 2 audio" the m2v extension changes to mts. This won't play in Quicktime even if i change the extension to mpg, m2v or whatever. I'm assuming i need a quicktime plugin to fix this.
Andrew

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