i've never had a problem importing mepg file in vegas before.
what does vegas say when you try to import the mepg file?
But you did say originally that it is an avi file so this would not have been encoded as an MPEG file at all, apart from maybe an mp4 but you can't change the extension of that to mpeg as this won't work. open the file using vlcmedia player and check the video information to see what codec is being used.