You have google experience ?
Go here:
http://ac3filter.net/
Download AC3 File AND AC3 Filter and install them. Then try again.
@several hours: how much space do you have left on c:\ ? Some people have only a few MByte left and do not own enough RAM. So swapping could indeed make the process a long time longer. Also try Divx if you think, Xvid does not work. You need to download divx and install.