This happens when you make movie in AVI by choosing a width and height that is not compatible with the selected video compressor. For most (usually older) video compressors, the width and height should be a multiple of two (even number) or four. The `Auto Select' option selects the width and height of the largest file added to the timeline - even if the width and height of that file is not in multiples of two or four.

This problem won't occur on newer versions of Video Edit Magic since it automatically converts odd dimensions to multiples of 4.