I’ve been struggling to find the best settings to use to save my edited videos.  My video camera takes 1280×720 HD footage and I edit with  Sony Vegas.  There are many formats to choose from and I want  a balance of low disk usage and high quality.  I  found this post and the settings recommend appear to be work well.  After selecting Sony AVC I select the “Internet 16:9 HD 30p template and verify the settings as described (except Audio  format is ACC).

File>Render As>
Save as type “Sony AVC”
Click “Custom”
Project Tab:
Video Rendering Quality: Best
Video Tab:
Format: AVC
Frame Size: Custom
Width: 1280 Height: 720
“Uncheck” Allow source to adjust frame size
Profile: Main
Entropy Encoding: CABAC

“Uncheck” Allow source to adjust frame rate
Field Order: None (Progressive)
Pixel Aspect Ratio: 1.0000
Bitrate (bps): I recommend anywhere from 4,000,000 to 6,000,000 for Vimeo. Only go below for longer videos.

Audio Tab:
Format: AVC
Sample Rate: 48,000 Hz
Bit Rate: 128,000

System Tab:
Format: MP4

RESULT: quality indistinguishable from the original. and if you wanna push it even further, add a ‘light shrapening’ effect to your footage, and the outcome will be EVEN BETTER than your original MTS file quality.

SIZE you ask? between 45 to 60% of the original MTS size.

The output format is the perfectly universal and usable MP4.