George,
I've fielded problems on other forums, and perhaps this one as well, from people using AVIs in Encore. Sure, it'll work quite often, maybe even most of the time, but there are many problems associated with it, including a/v sync issues. Importing mpeg2 has always solved the problems.
You're asking about upgrading from 2.0 to 3? You're asking ME? X-D
I use PP 2.0, but am still back on 1.5 for Encore and Audition. When it comes to new toys or new software, "new toys" has been winning the battle of the wallet lately.