I've posted about this before but I figured its worth a new mention now that the Expression Media Encoder preview is out in the wild.  

If you care about encoder output quality from any application that uses the Windows Media DMO, you need to get the latest v11 version of the codec, by either 1) upgrading to Vista 2) install Windows Media Player 11 on XP 3) install the Format SDK 11.

Once installed, be aware that the v11 codec has a ton of hidden goodness which needs unlocking.  To do this, go over here and grab Alex Zambelli's excellent powertoy.  This tool knows all of the hidden registry settings for altering encoding complexity, turning on advanced  deblocking and a ton of other goodness.  The tool also has great tooltips which explain what each feature does eg:

Once you've done that, make sure you read these articles (linked from Alex's site):