I happen to use Vegas 8 too, converted your clips to avi (im used to avi, havent fiddled with mpeg settings) with this, yes its flv to avi but it did the work with the mpeg file too.
Imo both resolution/aspect ratio versions look good but the clips are 300 and 150 mb big and I cant seem to make them smaller, so I skipped sendspace..
IIRC the codec* I used should be in K-Lite Codec Pack, otherwise I have a zip file with it aswell should you be interested.
If youd like I could post a screen and/or instructions for the settings if you decide to try the program I linked.
*Edit: the codec would be Huffyuv (v2.2)
Edit 2: Btw be aware when/if you install the converter, it has a slightly visible tickbox for some toolbar when installing, you dont want that..