I installed MCEBuddy and pointed it to source: C:\RecordedVideo and destination C:\ConvertedVideo. When a file appears in the source directory, MCEBuddy springs to life: the status monitor is blinking and main program window says "Video conversion, Program.dvr-ms...". In the Windows Task manager you can see mencoder.exe working and conduming about 50% of CPU. When it finishes there is no trace of an encoded file. When i stop/start MCEBuddy service it starts working again on the same source file.
What the...?! Do I need to install something else to get it working?