Thanks Porsche fan,
Editing H264/mp4:
I liked the frameserve suggestion although it appears that I'd need to re-encode rather than use direct stream copy this way. I end up with uncompressed video (gspot reports : IYUV w/ U & V switched) and the file is massive. A test of a few mins gave me 1.3G. :-). I'm sure I can get good results but it's a shame to degrade the original quality, there is always a downside to re-encoding.
I'll have a look at avidemux although I feel another steep learning curve coming on. :-)
Creating H264/mp4:
I tried my first test on meGUI today but it's not going too well. I see that when selecting h264, it only allows mp4 mkv or raw, so at least I can see why avi is not even an option here. However, any attempt to encode mp4 crashes x264.exe regardless of whether I create a d2v file separately or via the interface. I prefer doing it manually because I've got my avs templates set up but one thing that does cause a problem is that I convert ac3 to wav with dgindex. This is gives me another problem as meGUI won't deal with uncompressed WAV format.
As for the crash I have to assume that I have a faulty patched file. I was only able to get something output selecting the raw option. Xvid errors as well but that's more than likely because I've not installed the required file.
As for mkv, I had a file the other day that I had problems with and it appears the same, I really only wanted one scene from this file and couldn't cut it with vdub. I can play it with Gom or Vlc but the problem might be that I need a matroska codec. Not that familiar with mkv yet.
anyway thanks for your explanation.
EDIT: x264 - tried another patch version and that crashes even when using from the command line.
I finally found a version that works but I'm not sure it's a patched version so -nal-hrd params are not supported however, if anyone else is experiencing problems try here:
http://x264.nl/