Install codecs for VirtualDub
VirtualDub requires a Video for Windows (Vfw) compatible codec to decompress video.
DirectShow codecs such as those used by Windows Media Player, are not suitable.
This means that not all the codecs installed on your computer can be used by VirtualDub.
A very good codecs package that has VFW is ffdshow.
Just ensure you enable all your format decoders under VFW Configuration -> Decoder -> Codecs.