Hey, Jennifer ...
Thanks for the question. We're recommending MPEG-4 h.264, which is an open standard with clients for Windows, Mac, Linux, Unix, you name it. MPEG-4 h.264 is playable on iPods and is downloadable, unlike Flash.
Flash Video has some charms of its own, chiefly that the player is more ubiquitous than any other. As I mentioned a second ago, though, you can't download it (easily), and you can't play it on an iPod.
I wouldn't make arbitrary decisions concerning length or file size. You'll want to be as economical as possible in those respects without compromising your message.
There are a lot of ways to encode MPEG-4 h.264, but the easiest is to get a copy of Apple's Quicktime, upgrade it to the Pro version for $29, and use the 'Export > MPEG-4' feature. We're looking for 320x240 video at 24 frames per second; this is open to debate, actually, for many things, 15fps might be adequate. Not sure it would play in the iPod, though; need to borrow my wife's iPod video. Screen shots follow: