Ensure you are adding supported file types.
Also, if you are adding AVI files, this file extension may use different types of compressions (MPEG4, DivX, XviD, RM, etc.) to encode the video. Hence, you have to have the appropriate codec to reencode the particular AVI file.
Being able to play it doesn't guarantee that you have the approprate codec for it.
Note: If you have codec packs installed, then this might cause compatibility problems. Make sure to install only the official codecs for each video compression format. For MPEG-4 v1 to V3, install the codec from Microsof; for RM, install Real Media, for MOV files, install Quicktime; for DivX, install codec downloaded from www.DivX.com; etc).