OS X Lion Video Encoder Not Working

I don't know what the problem is. I was super excited for the video encoder that came standard with Lion because I have an Apple TV, and I figured it would make converting videos much less of a headache. I apparently thought wrong. I've been very frustrated trying to get it to work. Trying to convert some .avi files I get an error, which says something about not being able to open the source. I can't even get it to come up right now.

I tried to encode a .mp4 file assuming that it would definitely work because, unless I'm thinking wrong, this format is compatible with Macs. This didn't seem to do anything at all except produce a .m4v file that didn't do anything. My assumption was that it was maybe still converting, but there was nothing to indicate that so I deleted that file. Then tried it again, and it did nothing. Then tried again to convert the .avi file so that I could see the error and post it here, but again, it did nothing so I couldn't post the exact error.

Okay so just got the error, and it says:

avconvert: source file not found for source file: (lists file location)

avconvert: failed to create an Export Session.

Check Setup.

Any help or leads at all would be extremely appreciated.

Thanks,

Andy