I had to find out which option is the best in windows movie maker 2.6 when I was rendering my movie. I chose the option which was recommended rather than picking the HD option because I felt that it would take up too much space. Is that true? What are the drawbacks of picking the HD option and the benefits of picking the option recommended for your movie?
Quality (HD) video comes with a price, and that price is file size. Which option you use depends on what you are supposed to do with final video. If you will post it on YouTube, you will probably want smaller size. If you will play it in your TV, you want HD.
As a side note: VMM 2.6 is from Windows XP/Vista era. There are better choices these days.