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That does not seem right. It must have been compressed significantly. Why not use Vimeo?
I use a program called V2F to post Internet videos. Very easy, very good.
I post a lot of videos to a university media server. I used to do all Windows Media files and then go through the process of creating redirector files to refer to them, to prevent direct downloading. A couple of months ago, I began using Encore to export to Flash. It creates all the files you need, including an index.html with the Flash player embedded, and puts them all neatly in a folder you can upload to your media server. All it requires for viewing is a flash-enabled web browser and a broadband connection. On the plus side, anything I can put on a DVD can be put on this same web page, including menus, subtitles, etc. On the minus side, the Flash player skin is not customizable, and the video cannot go full screen. I'm hoping that changes with CS4.