Have you registered Video Factory? It won't open or render to MPEG until it's been registered.

Also, there are many cheap MPEG encoders out there that will produce non-compliant files. The files may be viewable in some players, but can't be opened in lots of editors. I suppose this might be done deliberately to prevent people from reusing the material. My boss handed me an MPEG clip that had been eMailed to him for inclusion in a corporate presentation. I could play it in Windows Media Player 6.4, but not in anything else. I ended up playing it full screen to the Video Out of my ATI Rage Fury card and recording it on VHS, then capturing it back from VHS as a DV file. Not an ideal solution, but it was the only way to make the clip usable.