RPG Maker 2003 is an oldie but a goodie. It's the engine behind OFF and several other famous RPG Maker games that are slipping my mind at the moment (unless they're Wolf RPG Editor games mistaken for RPG Maker games- happens more often than you'd think). But- get this- it is really old. Because of this, it has a lot of limitations- particularly when it comes to what kind of file it can use. Unfortunately, the software itself doesn't really tell you about any of this stuff. Even more unfortunate is that, in my own efforts to find out these limitations, half of what I come across is more experienced users being incredibly hostile towards newer users for simply asking. I don't expect this little page to get higher SEO than those, but I still want to do what I can to help remedy that fact!
Images in 2003 can only have a max of 256 colors (255 plus whatever color in the image will be turned transparent- think like a green screen). Unfortunately, simply having no more than that doesn't fix the problem- you need to change the properties of the image itself to reflect this.
In short, an .AVI or .MPG, ideally in 320x240 dimensions. I haven't fiddled much with these things, so far the only video I've wanted to put in one of these is the intentionally kinda scuffed credits for an April Fool's game. But, this is a pretty promising looking thread for making videos look decent. Feel free to let me know how various options fair if you try any of them out yourself- to be honest, most of the thread itself just goes in one ear and out the other for me. If you don't care about that per se, but, like me, your video software of choice doesn't let you save an .AVI in those dimensions, Cloudconvert can shrink things down to that size whilst converting. If you take this route, I'd recommend setting the audio codec to "copy" to ensure you don't lose audio.
More to be added as I run into more hard to figure out topics in my long journey. If you have some questions of your own, feel free to contact me... uh... whereever lol