Ok I read through the forum..........Let me ask this, after converting to Mpeg does the footage look at all degraded (pixel shifting or fuzzy?) Also i have never seen anything record in AVI that was only 640x480 res. AVI is usually 720x480 full resolution. But your specs do say it records to AVI........One suggestion if the footage is degraded after you convert it, recapture the footage in your "videos" folder through the USB cable then re-open your video album in studio, I can't imagine you would need to convert the files for pinnacle to recognize them.........I have the option of capture from device also as I use pinnacle 12 ultimate, but i find it to be more reliable to use the method I described above.
Good luck!