DVDfab produces H.264 AVI file that don't show any icons under Vista. By contrast, Xvid files do. And other tools provide H.264 files that do, so it can be done.
DVDfab's H.264 AVI files can still play, but I miss Vista's icons that show the actual video content. Assuming these files are slightly out of spec, so I won't be using DVDfab for H.264 till I see a change.