I'm sorry, but I am very confused. (Incidentally, I reorganised your screen layout putting spaces between your text and your images. In its original state, it was very difficult to follow.) I also simply don't understand what you mean when you said:
...except the trial was the content in the window, and it went straight down
But what is confusing me are the screen shots. They are most definitely not of the Video Studio screen appearance. The black part of the screen and the toolbar across the top looks like something HP might have installed. You said:
Then (randomly) when I tried playing a video clip that was not on the timeline
Where was that video clip if it wasn't in the timeline? Was it in the VS library window? And if it wasn't there, what were you playing it on -- Video Studio or some other player? If it was some other player, was Video Studio even open at the time?
And while you say the video was an .avi, what sort of avi was it? Unfortunately, there are over 800 different video formats which use the .avi extension, and they are widely different in Properties. So if you can open Video Studio, can you please right click on one of those avi clips in the timeline and copy ALL its Properties here, or take a screen grab of the Properties box and upload it here as an attachment.
Then we might have something which will tell us what is going on. But as it is, in all my years on this forum, I cannot say I have ever seen any other user report something like this as being attributable to Video Studio...