I would check which version of the Windows Media encoder you have.
The Express Release does not seem to support H.264 encoding.
Reality - you need a MP4 encoding license from MPEG LA. This is probably why only paid versions of Expression Encoder support MPEG 4.
Logically, you cannot convert from one video / audio format to another without loss of quality. WMV files typically contain video encoded in VC-1 and audio encoded in WMA. But the .mp4 file usually contains h.264 and AC-3 video.
So, your final .wmv file should only contain video in VC-1, which would mean decoding h.264 video and encoding it in VC-1. This means a loss of quality.
VideoLan can tell you the codecs used in your .mp4 and .wmv files. See this answer .
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