Video files need the correct CODEC. And .avi files can have a variety of CODEC's as they are not all the same. CS3 did not have many to start with.
You may have to convert video to something CS3 handles.
If you are looking for a thumbnail forget it, they will not display.
AVI is but a wrapper. An AVI file can contain a myriad number of CODEC's, as Curt points out. Some work fine in PS-Extended, but most do not. Same for PrPro, Adobe's NLE video-editor. See this ARTICLE for more background, plus ways to "peek inside the wrapper," and please report what is really inside the AVI wrapper.
Very likely that that info will tell the tale, on why this AVI will not Import.
My first guess is a CODEC, like Xvid/DivX, and my second will be MJPEG.
Good luck, and please let us know more.
Okay, I read the article and it was of some help. I downloaded the G-Spot program and it gave me this for one of the files I tried importing on CS3:
I hope that is of some help to you. I tried converting them to .MP4 (which CS3 can handle) but the quality of the video shows up grainy and poor, so I'd like to solve this codec issue.
Convert it to an uncompressed AVI file. You're applying compression obn top of compression when using MP4/ H.264.
How do I do that?
Unfortunately, the DivX material has already been heavily compressed. It is a good CODEC for streaming video, but is not good for editing. Even Adobe Premiere Pro (their video editing program) has severe trouble with DivX, and its open source "cousin," Xvid. If one can even Import that material, it is likely to only have the Audio, and either no Video, or bad Video. Again, good CODEC for delivery, under certain conditions, but really, really tough to edit.
Also note, as Mylenium pointed out, DivX is heavily compressed and in that process, much data has been lost, never to be recouped - once gone, always gone. No conversion program can get it back, but only convert your DivX into a format/CODEC, that can be Imported and edited. That is why I go with one of the lossless CODEC's for conversion of HD material - no more loss in quality.
Now, when I am handed either DivX, or Xvid material, and cannot get the client to go to the source, I use an older shareware program, DigitalMedia Converter 2.7 by Deskshare, to convert to something that can be easily Imported and edited. If the material is SD, I choose DV-AVI w/ 48KHz 16-bit PCM/WAV Audio, as that is about the easiest CODEC to edit, and has very low compression. For HD material, I just use one of my lossless CODEC's, like Lagarith, or UT (both free, and very good). I must point out that Deskshare has upgraded DigitalMedia Converter, but I have not tried the newer versions, as my old one works so very well, and does batch processing. However, there are many conversion programs available, and some of those are free, unlike the ~ US $50 DMC, that I have. I have no recs. for those others, but I would look for one that ONLY uses system CODEC's, and does NOT add any of its own. That will mean that if you are working with DivX, and going to, say the Lagarith Lossless, you would need to download, and install both of those, then reboot. Still, I find that much better, than any program (besides my Premiere Pro), that adds CODEC's to my system. Others might have some favorite conversion programs, so you might want to do a few trials. Remember, with the better ones, you WILL need to have both the DivX CODEC and then your "destination" CODEC installed on your system.
Good luck, and thanks for the G-Spot data.