I can't tell you about Movie Studio, since this is the Vegas forum, and I don't own Studio (well, I do own it, but don't use it much). However, in Vegas, I have never been able to open XVID directly. I usually first convert it using VirtualDub and then open the resulting file. Do a search on XVID in these forums (it is an easy search term and you'll get almost 100% useful hits) and you'll find recommendations for how where to download and how to install the appropriate codecs. I found that installing these codecs let me play XVID in media player, but didn't allow me to open the video files in Vegas. The problem is that Windows uses two different ways of opening video files (DirectShow, which is what Media Player uses, and Video for Windows, which is what Vegas uses -- I think I have that right, but maybe I have it backwards). If you can find a Video for Windows XVID codec and install that, it might work, but I don't know where to get one.
how do you convert it using VirtualDub? sorry. i'm a noob when it comes to these things. i know that vegas can open many types of video.. but XVID is not one of them. Is there a websitre where i can download the codec so Vegas will open the file? Note that i can play and watch XVID files... just not open them up in Vegas.
Program: Vegas Movie Studio + DVD Platinum Edition
I was not able to drop Xvid files onto the timeline either. I just installed the official Divx player and codec and now they work. Don't ask me why you need Divx installed to edit Xvid, but I'm just glad it works. Good luck.