Welcome to the forum.
AVI is but a wrapper, and much can be contained within it. What is the Video CODEC inside that AVI?
Some Video CODEC's, such as DivX, or Xvid, just will never edit well, and must be converted.
This ARTICLE goes into more detail, and also tells you how to "peek inside the wrapper."
Do you have quicktime installed? If not, please try after installing it and if it is, plese update.
If it still doesn't work, then The CODEC must be not supported by PRE