I haven't encountered your specific error message, but I do a lot of video editing and can suggest a few steps that might help.

1.  Make sure you have the codecs on your computer to play avi files.  Do this by opening the folder where the files are with the windows explorer (click on ducuments or computer on the right of the start menu to open it).  Once you've opened the folder and are viewing the avi files, right click on one and go to "open with", scroll to windows media player and try to play the file.  If it plays, the codecs are fine.  If not, follow the prompts to download the codecs.

2.  In Movie Edit Pro 12, you cannot directly "open" a video file.  It must be "imported" into the magix movie file.  If you are trying to open it some other way, it won't work.  Import the avi file.

3.  If it's still not working, try using windows movie maker.  This program is microsofts movie editor.  It's not as powerful as Magix, but is useful for simple editing.  As with magix, your avi file must be "imported" into the program to use it.

4.  Once you get an editing program to work, be patient.  You learn to use these programs by trial and error.  Your original avi file will not be changed by any editing you do, so you can always start from the original if you mess something up.

Hope this helps and good luck

Dude, I feel for you.  I know how frustrating these type of problems can be.  You're probably ready to smash your computer in half, jump up and down on your camera until it becomes part of the floor, then go to Germany and shove that Magix software somewhere unspeakable.  I'm afraid of making too many more suggestions that might just send you on wild goose chases, but I highly doubt that the MPEG-4 upgrade would solve anything.  You could try contacting Magix support at this page.

http://www.magix.com/us/magix-ag/contact/order-and-support/

There are a lot of variables involved - is there a problem associated with the camera files, your computer, the magix software?  It's hard to say.  I have been able to import avi files from my camera into the magix software, and aside from a few lock-ups, it worked fine.  Another camera I had always had a problem with its avi files, so I would convert them into wmv files before I started any editing (I had to buy a conversion program and it would take about 20 minutes to convert a 5 minute video).  My old laptop did the same thing on some video files - it would play the sound but the video would be black.  The same files would then play fine on my desktop.

If I were having the problems you are, I might try some tests to identify where the problem is.  See if you can find any type of sample wmv files (this stands for windows media video) on your computer.  See if you can import one of these into Movie Editor.  If this works, there may be some type of compatibility issue with your camera files.  If you can get access to another computer, try plugging the camera into it just to see if it will play the files in windows media player.  Generally, if the files from the camera won't play right in wmp, you will have a problem doing anything else with them.  I'm not an expert, just some guy who's been stuck before trying to help.

If all else fails, just go by a new computer and a new camera (just kidding - it probably still wouldn't work after you did that)