Can I convert AVI to YouTube compatible format without altering sound quality?

I took about 8 minutes of video of my husband’s most recent band performance from my Canon digital camera. It recorded in .AVI format. YouTube doesn’t like AVI apparently.

I used Windows Movie Maker to translate it into Windows Media Audio/Video format, and the quality went all to hell. Video kind of blocky and blurry, and the audio took on this really tinny sound. Not acceptable.

How can this be fixed?