AVI is a multimedia container format which may carry audio/visual data inside in virtually any compression scheme, including Full Frame (Uncompressed), Intel Real Time (Indeo), Cinepak, Motion JPEG, Editable MPEG, VDOWave, ClearVideo / RealVideo, QPEG, and MPEG-4 Video. However, Sony Vegas can only work with AVI which is in Motion JPEG scheme or in DV codec.
If your avi is in other codec, sony vegas will refuse to edit it
In order to successfully import, open and edit all kinds of AVI in Sony Vegas, we had better convert it to Vegas more friendly video format like DV.
Step by step guide on how to solve sony vegas can't import avi issue at http://www.bigasoft.com/articles/easy-solve-sony-vegas-avi-no-video-problem.html