Actually you can get one for free, just download and install the one from MainConcept, the demo works just fine for decoding which is all you might need.

I think an MJPEG encoder gets installed if you install the software on the CD that came with the camera. I never did, so I can't confirm that.

The Powershot S3 IS is a nice camera. I had not intended to use it for video, but I have been pleasantly surprised with the video quality, considering it's a digicam. Too bad it's only 30 fps, in PAL land. :-( The camera's encoder gives artifact-free compression of 640x480x30p video+stereo audio at about 15.5 MB/s (6.7 GB/hour), but with 1 GB limit per clip. That includes 16/44.1 PCM stereo audio from the camera's built-in mics.

The free MainConcept MJPEG codec is decoder only. If you want to encode back to MJPEG, you need to buy the codec.

I bought the MainConcept MJPEG codec to recompress my S3 IS footage after running it through Deshaker in VirtualDub. The result is not bad for a handheld digicam!

The only problem is the MainConcept recompressed MJPEG video is much bigger than the original from the camera, although much smaller than uncompressed avi. Recompressing with quality 100 gives a filesize about 4 times bigger than the original. Setting quality to 80 gives a similar file size to the original, but I see jpeg artifacts in the recompressed footage which don't appear in the original. I don't notice any artifacts at quality 97 or higher, and quality 95 is acceptable for casual use. 95 gives avi files about 2 times bigger than the original.

Does anyone have experience with the compression ratio vs quality on other MJPEG encoders?

I have S1 IS and it allows me to make a choice between PAL or NTSC. S3 IS should have also?

A workaround: re-encode your avi files with Win Movie Maker in avi too. Different AVIs but the ones from WMM will should work.
I had the same problem a few years ago with the Canon Powershot G2...