there is a sticky thread that i had made somewhere around here where it gives you a list of freeware converters - have a snoop around the site and you'll find it.
you could always use windows movie maker. its converts it with fairly good quality (good on your actual zune). however it takes AGES, first to import the file and then to save it as windows media player file.
I bought the xilisoft vidoe converter.. but when i want to convert themn from avi to wmv or mp4 they have a veeeryy bad sound quality... i have choosen 320 kbit sound.It has a lot of treble.