Hmm.. I havn't had any problems with this. Maybe you just have the "fast buffer"-option selected. That makes is look wierd. Turn it off in the "Display Settings"-window (on the bottom of the mainscreen).
If this isn't the problem, what format are you using on your video-file?
thats shouldn't be a problem. I've just been mixing some real life footage in moho and it works great. Does it show up properly when you render? Also whats the dimensions of your project and your video file?
I sometimes have a problem with avi-files to. They get a wierd obacity, sometimes get inverted, and solorized (I think that's what it's called), colors. But it works to render, for me. So what I recommend is that you insert the avi-file, and then render (without "Extra smooth images") to Quicktime, and then import the result. It shouldn't take that much extra time.
Otherwise many videoediting-programs support QuickTime as an export, so you can also convert the AVI here.
But it should work with AVI. Maybe it's the codec that's wrong, or maybe the framerate (I'm not sure if it makes difference). Set your project settings so it has the same framerate as the AVI, and see if that helps.
Otherwise, I have no idea. Can anybody else figure out what's the problem?
.avi is not more than a container for video, it could be compressed with many codecs, and I assume your file is encoded with a codec that does not work well on your system. I always use avi in standard PAL DV compression at 720X576 pixels and that works fine, both in preview and render. Can you recompress the .avi in an editing package or Virtual Dub to see if that makes a difference? Or check which compression was used?
An alpha channel is transparency information in the picture/video. It tells the file whether certain parts are translucent when rendered. Very few if any .avi files have alpha information though. .png and .tga image files and some quicktime codecs use it. Great for partial overlays. Maybe something is wrong with the direct-x drivers or your quicktime installation (I'm not sure how Moho displays, I believe using quicktime).