First off, I recommend using nothing other than Vdub to convert. Vdub is a nifty program that allows you to convert video files.
Secondly, I would never use anything other than loseless or uncompressed AVI files when editing in Vegas. Many glitches occur when using other types of video formats and make editing difficult.
So I would recommend downloading the AMV App. (http://www.animemusicvideos.org/guides/ ... mvapp.html
). It will come with all the tools necessary to make your videos look a lot better and make overall editing easier. Once you download the video you're going to need read the through this guide in order to fully learn how to use Vdub. It is a little more of a process having to go through this guide, but at some point down the line, it's strongly suggested that you do.