Your WMM may be starting it's inevitable path of a slow, painful and generally nasty death...
for now, assuming that the above isn't the case, ffdshow (included in the amvapp) has a history of not playing nice with WMM.
other than that, you may have halli media splitter set to split avi files (which it should not be doing)
you should be able to change these settings yourself...but seeing as I do not have the amvapp I can't tell you where to look for the program configuration gui's
the other big part of your problem is trying to edit with mp3 audio and divx/xvid footage.
both of these cause many problems (about 85% of the questions asked in the program help sections are divx/xvid related)
read this
and I do mean all of it, carefully. it will tell you how to fix the divx/xvid thing
how to deal with audio
another thing that I know beyond a shadow of a doubt will be one of your next questions. Lossless files are big, really big.
look at this for the solution (do it this way, even though WMM can make clips for you)