I did some further testing of my problem.
Using Media Companion 3.262, I discovered that a DOS window opens and says the avi file already exists and do I want to overwrite it. If I say yes it creates a working avi file.
For some reason a zero KB avi is getting created before FFMPEG.exe is ready to encode the avi using the fan-art.
In new versions of Media Companion the DOS window is hidden and I don't get the error message so Media Companion hangs waiting because the zero KB avi file exists and there is no way to get the user input to go ahead and overwrite the zero KB avi file.