HI all and Zwills
I don't think this crash at 2m39s is a problem related to gaps in the sequence as in V2.41, which I understand Zwills is using, the video track clips automatically joint on and there are no gaps (except the overlay and sound tracks.)
I assume that the crash occurs when Zwills is trying to create the .avi on his PC.but also asssume that the complete sequence previews OK within VP. It might be a PC problem?? 
One possible solution (workaround) might be to cut the sequence just short of the point where it crashes and remove All of the clips to the right of this point. Then save this first section as .avi.(using the settings I mentioned)
Reload the project (I understand the .vpj file and clips are still there) and then cut again at the same point, or just before it to provide an overlap, but now remove the clips to the left. Save a second .avi. In short, break up the sequence into smaller sections and save each as a separtae .avi file.
Assuming that the .avis create and save OK then close VP, reopen it and then reload them to the media list and sequence line.
(May take a short time) and trim off any overlaps between them.
Now save the complete sequence again as a new .avi. If it fails this time it has nothing to do with fades/transitions/editing/overlays of the original clips as VP treats these loaded files as a complete, single units.
Worth a try.
Nat