Hmm, to be totally honest converting a video to WMV in the first place takes so much information out of the video that it is not worth re-encoding. I always understand things better when they are conveyed in concise metaphor, so here goes...
Let's say your friend gets their hands on a really beautiful painting by Monet. The colors are crisp, the brush strokes delicate; a masterpiece. So, since they can't take the painting around with them and they want their friends to be able to enjoy the painting too, they place the painting in a Xerox machine and make a copy of the painting. Obviously most of the detail that made the painting what it is cannot be seen, though the basic form can be spotted. Your friend gives you the copy, which you take, but you are unhappy with the poor quality of the reproduction. If you took a high-resolution digital camera from Nikon and photographed the Xeroxed copy, would that picture be any better than the poor copy itself? If the original copy had been made in such a way, it would have been much better. But using a higher-quality medium on a bad copy does not help matters at all.