AVI, using the H264 default codec, looked, sounded and seeked fine in MPC-BE, which is similar to VLC. No crashes. The audio bitrate can be increased slightly, if desired. Click the Default Quality/Filesize blue link and in the Sound Format drop-down list scroll to the top (auto detect) item.
If you want a still higher bitrate, try the WMV format, which is also accepted by YouTube. Choose 320kbps in the Sound Format section.
While using high quality headphones, no tests here revealed any audio artifacts - just the expected crackling. That said, it's non inconceivable that your ears are hearing high frequency sounds that mine cannot.
If that's the case you might split out the audio track portions that are in question, open the audio effects window and choose EQUALIZER. Using one of the several options - visual, graphic, parametric - experiment with rolling off the highest frequencies. Also, try the AMPLIFY effect to slightly lower volume in those areas or even a little compression.