Here's an update.
I was able to successfully uninstall the
Adobe MPEG Encoder and update to the
MainConcept 1.3
I was able to save the AVI from VirtualDub using the plain non-mt HuffYUV codec. 42Gb in only 28 mins. And Premiere accepted this import extremely well. No more sluggish behavior in the timeline editor. Fast preview renders (11 fps), rubber-band adjusts and scrubbing. Yeah baby!
Now the last part to do before I can get the timeline ready for export using the newer MPEG encoder...
VirtualDub won't let me save out the audio WAV (source1) because it says "No audio decompressor could be found to decompress the source audio format". (remember, I am using an MPEG-2 source clip).
...any ideas??