Wrong, VFR is possible in AVI with D-frames. The biggest drawback of AVC in AVI is the problematic compatibility with the B-pyramid feature. It supports it but it creates a delay in the beginning by however many max B-frames were selected in the settings, which is up to 16.
That's the only one I can think of.
A better quesiton that that's been bugging me lately is if AVC in AVI requires more CPU than AVC in MKV/MP4. The difference is probably minimal but I assume AVI would have greater complexity because of the extra task of reordering the frames in the packed bitstream.
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Don't use FFDSHOW for h.264 encoding! The encoder hasn't been updated in years and not representative the advances made in the last few years. In fact it has been removed in most recent builds within the last year!
Use x264, and if you have to use vdub for whatever reason, use x264vfw
There is a large difference in quality. On average at typical bitrate ranges, 25-50% more bitrate is required to achieve similar quality for xvid. The differences are even more substantial at the lower end of compression curve - at really small file sizes you might need >100% more bitrate. That's more than "a little"
Not sure about your sync issues, but it might be related to using FFDSHOW for encoding
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