Fris,
Ah... I must have missed that you wanted to keep it as an MPEG file. The Windows Media Encoder converts source material in WMV format. You can convert WMV into other formats. There might be some useful info here:
http://www.digtv.ws/html/convert/convert-util.php
However, you will definitely lose quality and depending on what you want to do with the video there may be other problems too. You may be best with a cheap video editing program as suggested earlier in the thread.