Mini-movie icon tutorial?

I know this has been asked a million times, but I can't seem to find any entries...

How can I create a decent mini movie icon and make it agreeable with LJ's file size limit?
If I lessen the quality too much, it just looks terrible.

I made this one, but it just seems like I can't make them very long or it's too big:

Photo Sharing and Video Hosting at Photobucket

If anyone can refer me to a tutorial or give me some tips, I'd be very grateful.

Thanks guys!