Quicktime files will work (maybe you're using a non-standard codec or something). Chapter markers on an AVI file will never work, because DVD Studio Pro only recognizes chapter makers created in Apple applications (FCP, Compressor and DVD SP itself) and embeded on a Quicktime or MPEG-2 file. That would the case with other DVD authoring applications too - they will only recognize chapter markers created in a specific way. It's important to understand that DVD chapter markers don't really exist on Quicktime or AVI files. A chapter marker in a Quicktime file, for instance is "metadata". Just internal information about where the real chapter markers will be when you build the DVD - not the same thing, and that's why each application has its' way.
Adolfo Rozenfeld
Buenos Aires - Argentina
www.adolforozenfeld.com