Not obeying File size Limit, Statsfile Annoyance

[Aws]

Alright heres the whole situation. I capture video with my ADSTech DVD Xpress device. So i have a MPEG2 File. Then i load that up in Adobe Premirer and do my editing. Then i save that as a "Movie", and i have it as a Microsoft AVI File. I select No Compression. So that saves and i haev my AVI. So i want to encode it with xvid. I figure the fastest way would be VirtualDubMod because all i need to do is encode to xvid, crop, and deinterlace the video which virtualdubmod can do. So i open that up and load the AVI. Do my cropping, filters. I select fast recompress, save as a avi file, select compression Xvid. I set it on 2pass encode, and i set the Target size to 1200KB. When i click Save, i get the error Statsfile not found. Then another error, Cannot start video compression:
The operation is not supported.
(error code -1)

So i made a file called 1.pass on my hardrive and i changed to 1pass mode, and told it to save statsfile as 1.pass Went back to 2ndpass mode, and it has the same thing. So i try again and it works, but it ignores my TargetSize 1200KB, and it comes otu as 10MB. I cant figure out how to fix this ignoring filesize problem. The only way ive gotten successful is with Gordian knot. I load the avi, do my filesize limiting in gordianknots interface, and encode, and it works and obeys the file limiting. Can anyone help me figure out how i can just use virtualdub?

[Aws]

Ok i think i found out what i need to do by reading this,
If you want to use 2-pass VBR encoding you have to set up as "twopass, first pass", and save as AVI (there will be no picture in the resulting AVI file). Then go back to the Xvid configuration dialog and select "twopass, second pass" and Save as AVI again. This time there will be video. If you try to perform the second pass without first performing the first pass you get the statsfile error.