Some MPEG Codecs only seem to work for certain programs, there is a REALLY REALLY crappy free MPEG codec Called stinky's that works with Movie maker, however the quality on it is appauling and I'd really avoid using it at all cost, your best bet is to find a software that has its own MPEG codec built in like Adobe Premiere elements or something, Try getting Premiere Elements 1 or 2, they're cheaper now since 3 is out.
It's not about what camera you use or how much it cost.
It's about what you shoot,
how you shot it,
and how you edit it :P