Yes Windows Media format is very efficient but unfortunately proprietary to windows.
Beyond configuration the limits are whatever the machine and bandwidth are able to handle.
Video files are large and serving a lot of large files to a lot of simultaneous users adds up quickly to a heavy load.
Whenever possible I recommend off load the serving of the video to the infrastructure of free services such as youtube and just embed the youtube video in the web page so it plays on your site pages like I did on this page for example.
When you upload a video to youtube they convert it to a variety of formats to support different devices and different levels of bandwidth. For youtube you should upload the highest quality file you can create and not worry too much about compression to make the file smaller as that also can degrade the quality. Let them worry about compressing it and optimizing it.
For self hosted video files it definitely makes a difference about the tools used, some encoding tools do work better than others as far as compressing the video and audio.
Hope that helps,