I'm using FormatFactory to convert .rm Real Media audio files to .mp3. When I use the absolute lowest quality settings (sample rate 11 kHz, bit rate 32 KB/s, and 1 channel) I still get an mp3 file that is 50% larger, and of course the sound quality is crap. Should I use another converter, or is the size discrepancy inherent in the file format?

There are many free audio file conversion software out there, many are free. If your quality is set low to begin with, and you set the lowest quality upon conversion, this can possibly cause your problem. I always use the best quality settings I can, but storage space isn't an issue. Experiment with the different settings in your current conversion program and see what sounds and works the best. If all else fails, try another program.