Nero 7 can't play or burn ac3/xvid avi

Hello All,
I’m new to DVD burning and recently bought an HP DVD RW drive. I’m running XP and NERO 7 that came bundled with the DVD RW. It’s been working great, but I have a few movies that I got that have ac3 and xvid formats and Nero can’t play or burn them! I got VLC and it plays them fine, so I must be missing some codecs. I’ve done searches to see what the solution is, but haven’t come up with any yet? I was hoping it would be a simple plugin for Nero.

Any ideas on this?