You shouldn't have any trouble getting decent quality video at 160K/s with a number of different codecs.
If you want the absolute best and don't mind the hassle of figuring out how to install and use some complicated shareware, go check out ffmpeg (it's on VersionTracker); use XviD video with all the extras turned on, and you'll get good quality. It'll take a LONG time to compress, though. DivX, or even MPEG don't do too badly at that bitrate, actually, so long as you don't use full-frame (640X480) size--I've found 288X384 to be a good compromize between resolutoin and quality.
Another option is to try Apple's MPEG4 encoder (you'll probably need QT Pro, though I think iMovie can export that format as well), but be SURE to use a resolution that is a multiple of 16 in both directions--that's part of where the 288X384 number comes from. If you don't use multiples of 16, the files look awful. (This may be true of similar codecs, like XviD and DivX, but I'm not sure--might be a good idea just to be safe).
Have a look at OpenShiiva, while you're at it. It's not nearly as good as ffmpeg at giving you exactly the file size you ask for, but it's a lot easy to use and produces very good quality.