About the Saved Movie
The beta software doesn't offer any quality choices. With the DVD option, It saves your movies as DVD quality wmv files, a higher quality than any of the default choices built into the XP versions of Movie Maker. Checking a saved file shows it to be 640x480 pixels, 29.97 frames per second, about 3 Mbps bitrate with an audio bitrate of 192 kbps. That's a quality comparable to a high quality video DVD. Plan for wmv files of about 1 GB per hour of video.
The video codec used to compress it is the Windows Media 9 Professional one. The audio is compressed with the Windows Media Audio 9.2 codec,192 kbps, 48 Khz, stereo, 1-pass CBR.
The Portable Device option makes a good quality 320x240 pixel wmv file of 1.5 Mbps with stereo audio.
Note about Aspect Ratio... using true widescreen videos as source files results in the newly made movies being standard 640x480 videos with the widescreen source letterboxed within it, with top and bottom black borders embedded in the video.
Playing them with Windows Media Player on my widescreen laptop, the video displays with compound borders... on all 4 sides. Although Windows Live Movie Maker doesn't distort the shape of the input files, it doesn't provide an optimal output when viewing the movie on a widescreen display.