Pretty much yeah. VLC is amazing at transcoding.

Check this link here: http://wiki.videolan.org/index.php/Transcode

And my write up on VLC streaming here: http://www.dual-boxing.com/forums2/viewtopic.php?t=798

You will want to tweak the settings somewhat to use your codec and determine the size you want, make sure the resulting display is off so you don't render it twice, etc.

Hoping you have a dual core or better machine