That is probably because TMPEGEnc can't deal with MP3 and AC3 audio which is used in almost all rips you download.
You first have to demux the audio as an uncompressed WAV and than choose that WAV as the separate audio input. You can use VirtualDub to this easily and fast.
Open up VirtualDub and to the following things:
1.) Open the AVI file
2.) Choose Audio -> Full processing mode
3.) Choose Audio -> Compression... and select "no compression"
4.) Choose File -> Save WAV...
Be aware that you'll need around 1 gigabyte free hard disk space to do this.
Now open TMPEGEnc and choose the video file as Video Input and the WAV file as Audio Input. To make sure everything is fine open the option that lets you select the part of the video you want to encode and tick "Display Audio" on. Move through the video and see if the green audio display below the image changes. (you could have done this the first time with the MP3 and should have seen that the green line stays flat, indicating there is no audio input at all)
I know I forgot to told you this, but hey you learn the most things by trial and error, don't you?