Check the preferences and flush your media cache. You could have damaged preview/ conform files there. And do a little system maintenance like deleting temp files and defragmenting your drives etc. Could well be that you are running out of contiguous disk space for said cache.
I tried purging the cache, but it made no difference. My machine was restored to factory settings not long ago so there's very little clutter and I have tons of free space and memory still available.
I tried opening the footage in Premiere and that worked fine, so I guess one workaround would be to render it out uncompressed from there, but I'd rather find out what's wrong. Which preferences setting were you suggesting I check?
If you are NOT using AE 10 or 10.5 but an earlier version, you should know that m2t files will give your AE version fits. That would be AE CS4 or earlier.
Many people running those versions report the same thing: it was working before, but it doesn't now.
Their luck ran out, and depending on your AE version, your may have, too. The fix is to convert the footage to a lossless codec, and don't try using AE to do it: use a different application. I'm primarily a Mac guy, so I would make quicktime movies in the PNG codec. If I had Final Cut Pro installed on my AE machine, I'd make ProRes 422 files.
How 'bout Windows? Ask somebody else.
Sorry, I should've mentioned I'm using CS5, so there shouldn't be any compatibility issues. The strange thing is it was working fine just a couple of weeks ago when I left it. Not a thing has been changed whilst I was away, but the footage has stopped working in AE. It was transfered back and forth from an external HD, which I worried might be the cause of corruption, but it opens fine in Premiere or anything else. I guess I'll just have to render out an avi duplicate and use that instead. Cheers for the input.