for test renders, you should render at lower resolutions. What you are rendering at is essentially HD res; while there’s nothing inherently wrong with rendering at HD res, it takes up a lot of time and a lot of disk space (as you have found out). Render at 800x600 for starters (or even lower - I render at 320x240 - to my eyes there’s nothing wrong with that resolution) and save the high-res renders for when the project is truly done.
As for saving the renders, what everyone said above is true - render to frames first and let other programs compile the frames into a video file. There are a range of programs to accomplish this, from free VirtualDub to expensive Adobe Premiere / Final Cut Pro / After Effects Pro. You can also compile the frames with Vue itself, but its a bit of a pain. If you have another 3D program like Lightwave (it’s what I use, but other programs should be able to do this) compile the frames by loading the frame sequence as a background plate and then having the 3D program render out to a video file (not as good a solution as using a program like Virtual Dub or Premiere, but it DOES work.
As for what codec to choose - try them all. See which works best for you. AVI DV is probably a good all-rounder that’s compatible with a lot of programs. AVI Cinepak is another all-rounder whose advantage is that every Windows machine can play it. Rendering out Quicktime MOV is also good, and allows easy access to MPEG-4 .h264 for smaller sizes and retention of image quality.