Why an AVI video file cannot be imported to iMovie?

I can't tell you why some AVIs can be imported but this one can't, but if you know that the file itself isn't corrupt or anything, I can give you a remedy: Handbrake is an app that can convert almost any video format to MP4, which iMovie should definitely be able to handle. Open Handbrake, select your video file, enter the destination path you want if you don't like the default, and press Start to run the conversion. When it's done, see how iMovie reacts to the MP4. Good luck!

It likely has less to do with the size of the file and more to do with the format in which the audio was encoded. I second the suggestion to download the free application HandBrake and encode the file as an .mov or an .m4v with aac audio. There are presets built into the app, which make it very simple to choose output formats that'll work with whatever hardware & software you're intending to use to play (or edit) the video. HandBrake, also, has advanced options that allow for more granular control of encodings and a fairly active user and development community forum for support. HandBrake is really the best option for maintaining quality while reencoding any video files not of one's own creation and can also be used to rip video directly from disc; there are a number of lighter weight and more simplistic options if you needed to only remux the file.