I swear by VirtualDub, combined with AVISynth, both of which are free. However, if you were using WMM or Nero, you probably won’t like them. They are not user-friendly, at least unless you really know what you are doing. VirtualDub only supports AVI files natively, but with AVISynth, can handle any video that can play on your computer (short of copy protection and the new Windows Media Foundation on Windows 7).
Editing video can be an extremely complex process, particularly for video from different sources, and programs like WMM and Nero make it seem quite painless. But they do so by handling the complexity in the background, and limiting options and choices available to the user. This makes them easy to use, but quite limited in terms of functionality.
For example, don’t expect to be able to do frame by frame editing on any compressed video, and just about any videos source you will work with will have compressed video. To edit frame by frame, you will need to uncompress the video first. This necessarily involves very large file sizes. Once you have done your editing, you can then recompress the video. Everytime you go through this process, some video quality is lost. And keeping audio in sync is non-trivial.
The tools I suggested above, along with many other plugins and codecs, permit the ultimate flexibility in achieving all kinds of edits and effects. But they are not easy to master.
If something that daunting seems beyond your desire, Sony Vegas is a good recommendation.