Please follow the next steps:
1) Rip Happy-Go-Lucky's main movie to HDD (pick the AC-3/5.1 Audio stream only)
2) Verify ISO mounted with Virtual DAEMON plays in WMP 11 with no sync problem
3) Encode ISO to AVI with: DVD to Mobile - Generic [Video Format: h264 - High quality encoding (2-pass) - Fixed Bitrate 1800 kbps - Frame Resolution: 688x304] and [Audio Format: same as source] and [Subpicture: Extract to idx/sub file]
4) Play AVI file in WMP 11 and verify audio is about 2 seconds ahead of video
Let me know if you need more information.