1. Since direct stream copy means no change in avi encoding, then you have to go deeper with the answer. In fact you have to reveal what is AVI 1 and 2.
Since AVI is nothing more than a container and there is no version 1 and 2 I think this discussion falls apart fast.
2. Try the apps you found, test and see if it works for you.
1. Will I lose quality if I convert avi 1 to avi 2?
I know programs such as VirtualDub can trim/combine avi without quality loss with an option to "direct stream copy." Does something like this for converting avi 1 to avi 2 exist?
2. I found a program called "Ulead DV converter." Is that something I want? Or is there something better? Will this program lose quality of my avi?