You need to install the DivX codec. Get ver 5 from w*w.divx.com.
Try playing the AVI in Windows Media Player, does it play okay?
If still probs with AVI loading into TMPGEnc, then it can actually be the Audio part of the AVI. Load AVI into VirtualDUB, in Audio set to Full Proccessing Mode. Then under File, select Save WAV. Then in TMPGEnc, select the WAV file for Video Source and the AVI fro the Video Source.
Also, while you were in VirtualDUM, check File Properties and note the Frame rate (25.0, 23.976 or 29.97) and then in TMPGEnc, load the appropriate Template that matches that frame rate.