ULead Video Editor Format Problem

I used Easy Cap and its Ulead software to Capture an AVI file from my old analogue video camera to a Freecom external drive, formatted NTFS for the purpose. HP nc4000 1.5Ghz Laptop under XP Pro SP3.

Easy Cap sound would not work - horrible interference, probably CODEC mangling, so I simply used the audio from the camera headphone direct and the audio via the USB converter. I tried selecting AVI and DV, DV just auto selects AVI anyway.

It worked fine and the resulting AVI file will play in Windows Media player and also the Ulead Video Studio Editing Window.

PROBLEM: However if I try to save the edited file from the editing window or move the original file thumbnails into the Drag and Drop editing window(the one along the bottom with the timeline/clip alternative views) it says "The Content of These Files is Unreadable" - which it clearly isn't as I recorded them using ULead to a file Ulead can play in its editing window.

Any idea what is going on please???

Puzzled of Sunbury.