I have tried to see the difference between something encoded with AVC and MP4 and really cannot see a quality difference. Size yes, but not in the quality of the picture.
I used both 3GP and PSP9 and the same setting on both
29.97/768 Stereo 128kpbs
I got a few demos off of IGN... 34 and March Of The Penguins... they looked awesome compared to their MP4 counterparts... what did they use???