As far as I know, there is no MVE-compressor publicily available.
Several members of some fan-comunities were able to convince the Interplay to provide them with the original Targa to MVE converter. I have contacted one of that lucky guys a year ago, he claimed that he could not copy the utility because of very strong restrictions from Interplay.
This situation is unlikely to change.
Mve2Avi is just a capturing program - it catches the DirectX calls and saves the screen contents into file, that's all. It knows almost nothing about structire of MVE.
The only way is to completely explore MVE-format and then to make the compressor.
The compression algorithms is too far from optimal. Currently, MVE is about 1/3 from the total size of original images.
And there is no sound track support yet.
Keep up the good work ABel! If this gets to be full motion with sound, you'll not only have helped me, but any other person that wants to make a TC. I definitely look forward to that.
Perhaps you could try turning something like an animated .GIF into a .MVE?