Honestly, your best bet is to spend $70 on a video editing software. I do a lot of video editing. (And I also have a Hero 2). It allows you to do whatever you want to the video. You can shoot in 1080, and then compress it down to just about any resolution you want. Plus you can add fancy subtitles, burn DVD's add transitions etc.
There are lots of options, but i use Cyberlink Power Director. I've been using it for about 4 years now and have had no complaints.
Like most things in life, you can arse around for hours doing it half-assed and still not be happy with the result, or just get the proper tool, and it's SO much easier, and the end product is better.
That's my two cents anyway