Nancy,
I managed to insert the clip into VS X3 without problems. I'm however running on Vista, which there should not be that much difference in Win7. I'm still curious as to what codec pack you installed. If possible try removing the codec
pack. Hopefully it will not take any other codecs with it, or it has not corrupted any codecs that were already on your machine. If so you may have to re-install VS, I know a task none of us relish in..
Also did you try to upgrade your Quicktime Player? I do think that you need one more current than 6.5.1.0, since you're running Win7. In the link I provided above, find the same version I'm using, download it. Then before you install it, go to the Control Panel, Programs & Features, and uninstall your old QuickTime Version. Next install the one you downloaded, and see if that fixes the problem.
Your camera records video using Photo-JPEG, which is about the same as Motion JPEG (MJPEG). Did you try to install any software that came with your camera? It should have installed that codec. A way to check to see if VS is seeing that codec is to open VS, then go to Settings>Project Properties. In the dialog that opens, change the Edit File Format from MPEG to AVI, then click on the Edit button. Next go to the AVI tab, and click on the Compression drop-down menu. You should see it there.

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