Tiny AC-3 Files in AVI How do i do that?

Past few days i have come across couple of Xvid/Divx movie files which are 700 which means whole movie is encoded in to 1 CD. FourCC says "Divx5". Coolest part is, even though the movies are encoded to 1CD they contain 2 Channel AC-3 Soundtrack other than MP3. Quality of the movies are pretty good also. I was really curious so i Demuxed the audio track and AC-3 track is almost same as the size of MP3 128 VBR. It's pretty cool, does anyone know how to do it?, One AC-3 file also says while play "2CH AC3 160KBITS". Is there any specific software which we can compress 5.1 channel or 2 channel AC3 files in to Smaller bitrate files?. DId any of you guys come across these? If somebody knows how to make these Ac3 files tinier instead of re-encoding it to mp3 please let me know. I almost forgot to tell ya, The length of movies are pretty long also, 1:38, and 1:40 etc k?

Thanks a billion.