I ended up using a program called 'Chopper XP'.
I was able to convert directly from a time start and stop point ( 7:20-8:20 ) and created a new .vob file.
I renamed it .mpg and uploaded it directly to YouTube uncompressed ( 55mb )
Windows Movie Maker still won't see it, but Window Media Player will.
Anyway, this is the one and only time I think I will have to deal with this format.
( given to me )
Here's the clip:
KT