I think the difference is just the number of options in save formats, because every time I select anything other than MPEG4 and then change the sound format from the default PCM it goes back to MPEG4 again. I'm not aware of any other missing features, correct me if I'm wrong someone 
You might need to use NCH's Prism Converter software to make copy clips to work with (then delete them once you've made your movie). It's quick and easy. Download it and take a look. I've used VideoPad OK with AVI files containing MPEG4 (AVC/h.264) codec streams, so it should be possible. What type of camera is it, and if there's an example clip somewhere to download I'll see what works with it...?
(Stick a short clip on rapidshare.com and give us the URL it presents you with (you don't need to complete the email stuff) then we can download take a look)
