windows has a built in video editor called movie maker that is easy to use
if you use it in combination with avi demux you can make amv's fairly easy
you will need a few codecs check out http://www.free-codecs.com/
there are also a number of tools for making mkv files and convert them to any format you wish, check out http://www.afterdawn.com/guides/archive/creating_mkv_files_with_mkvtoolnix.cfm
for more info
basicly it will take a combination of free programs to make your amv, if you don't have the money to spend, that'd be the way to go.
another great tool is vdub and vdub mod check out http://www.virtualdub.org/
microsoft also offers free wmv/wma codecs and command line tools, although their site can be hard to navigate.
you can google wmv codecs/tools to find other places to download from.
a cheaper alternative to vegas would be camtasia, much cheaper and easy to use.
hope that helps some:)