Your doing the right things to fix the audio sync, stay with it, just move in small steps only. Many people have a/v sync probs with DVD Movie Factory so maybe have alook at something else, such as Ulead Video Studio. Never a synce problem for me.
The "this does not support resolution of 780x80." bla bla bla. is saying there is a problem with the AVI. Try DivFix or DivXRepair. Also try loading the avi into VirtualDUB, set video to Direct Stream Copy, Audio to full Processing mode and then Save AVI. Then try encoding the new larger AVI.