You guys are really throwing me here! I've used this identical procedure dozens of times with two different computers and I've never had WME error out on me.
I wish I knew what you guys were doing so I could duplicate it here. However, if you say you're following the directions precisely, I'll have to assume it's not something you guys are 'doing'.
So, what happens if you rip the DVD into an Xvid file? Same errors? Have you ever got it to work using any AVI or MPEG file? Try encoding a file you didn't rip from a DVD. Try installing the latest Divx and Xvid codecs (
do not uninstall Divx 5) and see where that gets you (install Divx,
then Xvid). Re-download the WME and reinstall it. Copy the AVI file to a different drive and try to encode it from there. Do you have any special video accelerator programs running? What programs do you have running that may interfere? How about older video encoder programs that you installed and tried out but don't use? Performed any registry changes lately?
These are the simple procedures and questions I would begin with if it were happening to me...
I'd be interested to know the results...