Converting to HD avi can be done with NeoScene from Cineform, but i doubt Premiere 6.5 can handle that.
Converting to SD i would not know which route to take.
I think upgrading to CS4 will be the easiest.
Sorry misread.
Mpeg can be difficult to edit.
When you get a message saying unsupported format on an avi it is usually divx or xvid you are trying to import. Am i right?