You should not face this problem if you are using the latest version of Video Edit Magic.
One of the most common reasons a video compressor used to fail in earlier releases is that the compressor was not able to handle the dimension of the added video file. Most compressors failed with odd dimensions or dimensions not in multiples of four.
In Video Edit Magic 4 and higher, we have an option to convert dimensions to multiples of four automatically during Make Movie (in AVI). This option is selected by default.
You can also choose to make your movie in other formats like WMV, MPEG, DV-AVI or QuickTime.