AVI is a wrapper, what is inside YOUR wrapper... Exactly what is INSIDE the video you are editing?
Codec & Format information, with 2 links inside for you to read http://forums.adobe.com/thread/1270588
Report back with the codec details of your file, use the programs below... A screen shot works well to SHOW people what you are doing
http://forums.adobe.com/thread/592070?tstart=30 for screen shot instructions
Free programs to get file information for PC/Mac http://mediaarea.net/en/MediaInfo/Download