I've used Windows (live) Movie Maker to make tennis videos for about 5 years now. I convert the dvd's using any video coverter. The latest one I converted into an avi file shows this error though. I've no idea how to overcome it. It happened 2 months ago now and I've not had a solution.
I've not had issues with that application cause I use Sony Vegas and Adobe Premiere for the editing. However I have had similar issues before and what I've found is the original file being used is partially corrupt, so I've hard to start entirely from scratch.
The problem of course with doing this is the time involved.