Forgive me if I sound like and idiot..
I am just getting involved with the whole codec dicussion.

Iam attempting to deinterlace some files using Virtualdub. But, I keep getting and error regarding my codec. It tells me that I need a file called dvsd which related to a Panasonic Camera.

Is this the same codec used for the XL2?

http://www.videohelp.com/tools/Panasonic_DV_Codec

If you can view the file, you obviously already have the codec on your computer, but it might be a read only version of the codec, so rendering back to the same codec may not work.

DVSD is not related to any camera in particular, it is the Microsoft codec for handling standard definition digital video on a PC, it comes standard with any PC, it's part of your operating system.

In VDub you need to specify what codec you want your video rendered in - what are you choosing there? Are you also resizing? Some codecs only accept certain sizes, usually both sides of the video have to be a multiple of 4 (pixels), othewise you get errors.

Come back with details,

no , it is a windows problem
there is are 2 ways to play video on windows, the directX et the old video for windows.
DV codec is directx only while virtualdub still uses the vfw style.
so the microsoft DV codec is not reachable by virtualdub.
There are several DV codec working with virtualdub like the one from Panasonic, or the one from mainconcept.