Thank you for contacting Sony Creative Software. There is an issue with importing AVI files into DVD Architect 5 that we are working to correct in a later version. For now the workaround is to use Vegas Pro to render your files into MPEG-2 and then import those files into DVD Architect, rather than doing the AVI to MPEG-2 rendering with DVD Architect. We certainly see the gravity of this issue and appreciate your patience.
So I was right after all. There was a problem. In any event, I'll be using MPEG-2 from now on.