Hi Chris, I use VLC a lot and edit my files like this.
Using VLC, go to File/Wizard and click Transcode/ save to file. Select the required file and convert to MPEG1 right through.
If your files are already MPEG 1 then omit the above bit.
Open Media Coder from click here
and again recode using codec MPEG 1 (audio MPEG Layer 2) If it says "No disc" just keep clicking continue.
The file will then be called "VLC.mpg._transcoded" or similar.
This file can now be accepted and edited using
Virtualdub.exe and will need to be saved as an AVI file.
If you have more than one AVI file they can be joined together using MediaJoin but leave the output file as AVI for better quality.
The final AVI file can be reconverted to .MPG and made smaller by using VLC/file/Wizard.
Incidentally, Virtualdub can also be used to synchronise sound and video if they get out of sync.
All the above programs are FREE and covered by Google.
I hope this helps.