Full lenght movies DOES work on a 1.010 firmware.
I've converted 5 different movies using VIRTUALDUB and the settings given in this board, on of them was more than 2 hours and more than 350 MB

They all work.
But with absolutly all other conversion software it did not work.
Conclusion : For long movies ( more than one hour ) use Virtualdub, for short ones, you have the choice ^^ ( WinMenc, Badack .... )