Apply differing compression to parts of one video clip

I'm using Windows Media Encoder 9 to compress and convert .avi files into .wmv files for progressive playback to Windows Media users. When I'm planning compression for a 2 or 3 minute video segment I usually want to apply different techniques/strengths to different parts of the clip.

What's the best way to accomplish this ? Chop up the clip, apply the different compression to each piece and then join them into one clip ?

I didn't see any easy way to achieve this using Windows Media Encoder, so I picked up a program called #1 Video Converter. It let me do some chopping and joining, but it's very limiting and I'm wondering if there is a better solution.