The DirectShowSource warning means that you don't have a VfW decoder for the video format you're trying to open, installed. If it's an XviD or DivX AVI it should be fixable by installing XviD. ffdshow can also be used, if you remember to install ffvfw and enable it properly. Anything else than AVI files can't be opened without DSS though, so it's recommended to use AVI files, preferably without B-frames, for typesetting.
But what the DSS warning means in practice is that you can't expect timing by frames to work properly.
