FFMPEG poor quality
 

I'm rather new in topic 'Video compressing and conversion' so please be forgiving.

I created (with my own program) 300 640x480 PNGs named frame<number>.png.
I want to make a movie with 300 frames at about 25 frames/sec. So I typed:

ffmpeg -hq -i frame%d.png movie.avi

Created file has about 3 MB and its resolution was 640x480. But the quality was SO poor - big artefacts (these ugly squares).
So I managed to read man page. And I have once change output resolution to 320x240 - the size of course decreased but quality was still bad.
And finally I found qscale parameter. Ater few experiments I set it to 10 and quality was almost perfect but the size was unacceptable - about 8 MB (700 MB CD would contain 18 minutes!).

How can I make almost useless compressed movies with proper size of file?
I tried also to change bitrate - didn't help. Will it help if I change size of PNGs to maybe 1280x960?

Thank you in advance.