I assume you're running vista valok, to see the extension and be able to change it go into start -> control panel -> appearance and personalization(make sure you are NOT in classic view) -> folder options -> view -> uncheck box that says hide extensions for known file types. You should be able to use it fine as an mpg, it won't work with Dreamscene as an AVI. Try downloading Divx(http://www.divx.com/) if you're having issues playing the file. Unfortunately, I cannot make it at 1920x1200 without losing major quality because my monitor only goes up to 1600x1200.
I did what you said but it still won't work for some reason. I can access the file through the dreamscene area under 'desktop background' but when I try to set that as my background, I get an error message saying "the video file format is not supported, or there was an error decoding the file"
Does this mean I need to download some sort of codec in order to play this? If so, which one?
*Edit* I'm now pretty sure that my problem is that I can't get the file to play anywhere I open it from.