Dano,
I just did a short film, so here is what I did. First, select the part of the film you want to make into an AVI. You do this by using the start select and end select buttons. Then when you make the AVI, there are two buttons to convert all the film or just the selection. I save just the selection an uncompressed AVI file.
Next I opend that file with Windows Movie Maker, added some music and saved it as a WMV file. The film was about a minute, the uncompressed file was 500M, and the compressed WMV file was 1M. These films can get huge and can take some time to convert.
I'm not very good at this, but after hacking around with it for about 3 hours, I made this film. It is a missing man formation we did over about 100 pilots on foot in formatin at the field.
Missing Man Gunner