WMV is just an ASF container that could have many streams of videos, each one may have a differnet encoding. However WMV files generally contain one or more streams with one of the Windows Media Video encodings (see http://en.wikipedia.org/wiki/Windows_Media_Video#Video_compression_formats for a full list).
HTC's web site lists WMV9 is being supported on the phone. See http://www.htc.com/www/smartphones/htc-desire-z/#specs. You probably want to use Windows Media Encoder 9 to ensure that you are only use V9 encoding.
The phone has a 480 x 800 resolution. I suggest you convert the video to fit the small screen, or the phone needs to soft-stretch the video. Some video players can do that but that is not battery friendly.