I always used HandBrake for video conversion (compression) which works great, but today I found an answer on quora which explains how to convert videos through vlc, when I converted through VLC, the results were better than handbrake. But I wanted to batch convert files (multiple files at a time), which was possible in VLC's V-3 (nightly version) which I downloaded from nightlies.videolan.org.
The problem I face is when I convert a file, the process is done smoothly until it reaches the end, where it shows the following error (shown in the image) and the converted file isn't usable.
Edit: I tried both 32 bit and 64 bit version of the software, and I am using windows 7 home premium 64 bit.