The error you are encountering is because you have used the 'File > Open' command to try and insert a video file. This command opens DVP (Digital Project Files) rather than video. To insert video onto the timeline try the following,

1. Launch Video Editor and from the 'File' menu select 'New'

2. From the dialogue box select 'DV xxxx' and click ok. (xxxx = NTSC for North America or PAL for Europe and Australasia)

3. From the 'Insert' menu select 'Video File ...' and use the dialogue box to locate your captured movie.

4. Drop the movie on track Va or Vb as required.

5. Repeat 3 and 4 as required

6. Enjoy

Alternatively check out my first reply to young Browners at,

http://www.videoforums.co.uk/ftopic1366.html

Happy editing.

__________________
IBM A51p with 160Gb Boot Disk, 160Gb external Firewire Disk, 2Gb Memory and a super duper sound card, 17\" TFT Monitor etc etc etc
Sony TRV33e : Sony TRV310e : Canon XM2
ULead products mostly including Mediastudio Pro (V8.0), Video Studio 8, Movie Factory 2.0, Premiere Elements

Remember, there is always more to learn than there is to teach.