1) Remove the audio from the video files using a program such as Format Factory (not guaranteed to work since XVID doesn't play nicely with Vegas anyway)
2) Convert the video to something more compatible with Vegas. I recommend UT Video: http://www.videohelp.com/tools/Ut_Video_Codec_Suite
!!! Warning !!! UT Video produce very large video files - we're talking gigabytes - but you're almost guaranteed not to have any problems.
You'll need to install both the x64 and x86 UT Video codecs if you have a 64 bit system otherwise just install the x86 version.
You'll also need to download ALL of the following programs in order to convert it:
•FFmpegSource2 Plugin: http://ffmpegsource.googlecode.com/files/ffmpegsource-2.14-mt.7z
1). Install relevant programs and codecs.
2). Make sure the FFMPEG Avisynth plugin is in the following folder: C:\Program Files (x86)\AviSynth 2.5\plugins (it's called FFMS2)
3). Open AvsP and type in the following:
Where C:\Video.avi is the location of the video file you want to convert.
If you need the audio as well, then type the following:
Note: you may need to extract & convert the audio into another format first such as AAC if you get errors
4). Open the Avisynth script you just created in VirtualDub by pressing the ► button
5). Go to Video and select Fast Recompress
6). Set up your compression options by selecting Video --> Compression and choose UT Video:
---- i). Select the YUV420 version
---- ii). Default options are fine but you can choose Optimize for compression ratio (Predict median) for a *slightly* smaller file
7). To convert, go to File --> Save as AVI