I had the same problem and I am assuming you are using a TV capture card. If
so you can try this to solve the problem.
Open your capture card settings and set your codec you are going to capture
with to Windows Media Video and Audio Codec. This will then result in
windows movie maker using this codec during the capture phase. It worked for
me.
i have SP2 installed but the WMM is still version 2.0... although i tried
downloading the SP2 from Microsoft site and installed it but still the
version of WMM (Movie Maker) remains 2.0.... any ideas? i need help
please!!!