I'm hardly an expert on Virtual Dub, but...........
Did you use Direct Stream Copy?
Or Full Processing Mode??
I'm not sure, but that might make a difference.
If I just want to make simple cuts, with nothing fancy at all, I use Machete Lite. It is free, simple, and works on AVI and WMV without any loss in quality. It has never failed me for that purpose and is much easier to use and understand.