Originally posted by attar:

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I've only inserted chapters into DVD movies.
It isn't difficult but it can be tedious if the video is 2 hours long and you want to have sixty chapters.
Typically you open the avi in the likes of AviDemux or VirtualDub;scrub through the video and note the frame numbers where the chapters should be.

Convert the AVI using a program like AvsToDVD and edit the title to include those frames as the chapter points - else, as you say, they automatically default to five minute intervals.

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