Yes DV-AVI works and it makes gigantic files. I have experimented with it.
From WindowsMovieMakers.net;
"Movie Maker can encode your final movie into standard DV-AVI format. This is the compression format that the digital video on your camcorder is recorded. The format is great, as the quality is outstanding and it can go through many generations of editing before degrading. However, videos saved in this format are very large ? every minute of video takes up 200 megs of space"
Also, for reasons I don't understand, DV-AVI produces files in 720x480 resolution, which is a 3:2 aspect ratio, not the standard 4:3 aspect ratio of 640x480. So they are distorted when they play in Windows Media Player.
Maybe someone can explain what's the deal with the 720x480 res and 3:2 aspect ratio.