This is actually a bug in the NewTek avi wrapper codec, but you can fix the problem by disabling the avi read/write feature in DVDWS. To do this, browse to C:\Program Files\Ulead Systems\DVD Workshop 2 SE\vio and delete the file named uvavi.vio
Many programs that are capable of writing avi files will cause the same dialog to appear since they apparently check to see if a codec is capable of compressing/saving by opening a write handle when initializing the list of system codecs (Serious Magic Ultra is one example). Programs such as Windows Media Player which only read avi files do not cause this issue. I find it amusing that a program included in the VT4 suite causes the same issue yet nobody bugged it.
The problem popped again up when I went back to open SE, so I -had- to find the solution. Oddly, a search on a few of the words didn't show that thread in the forum search here, but Google found it using the entire string of words. Always just after I post...
I wasn't brave enough to delete the file outright, so I made a folder just for it and moved it instead.