I'm not sure if it even works at all. From what I underrstand, it should create multiple files, but for me it always create a single one, no matter compression settings.
Compression is set by menu (i.e. not in save dialogue as with Save video...):
Video: go to Video->Compression mode for your case (e.g. Full processing mode or Fast recompress if you aren't using filters or other advanced functions), then Video->Compression...
Audio: Audio->now there's no choice, so Full processing mode. And again Audio menu, but this time Compression... item will be active.
I tested it on some file and here's MediaInfo partial dump:
Format : AVI
Format/Info : Audio Video Interleave
Format settings : BitmapInfoHeader / WaveFormatEx
Writing library : VirtualDub2 build 44282/release
Video
Format/Info : Advanced Video Codec [note: alias H264]
Format profile : High@L3.1
Bit rate : 1 416 kb/s
Audio
Format : MPEG Audio
Format version : Version 1
Format profile : Layer 3 [MPEG1, layer 3, is MP3]
Bit rate : 192 kb/s
Alas, even if segmenting would somehow work for you, you should remember:
- VirtualDub (10 years old, dead) and its fork VD2 (4 years old, dead project leading to unfinished parts) are both legacy tools and it's expected that some functions won't work as they should.
- VD2 was lacking genius of its original author, leading in less optimized environment and loss of stability, so while you got some sugar (mostly non-avi containers), you may encounter many problems along. It's not like it's unusable - I like the simplicity, so I'm using it quite often.
- AVI is not a great choice nowadays. It's a very limited and old fashioned container. Some features work against format specification, so you can't be sure it will play well for other people (https://en.wikipedia.org/w/index.php?title=Audio_Video_Interleave&oldid=1238152276#Limitations).
- Segmenting with any tool often leads to audio desynchronization and problems in making precise segments (keyframes, b-frames...)
If you want to do it anyways, and you'd encounter same problems as I (no segmentation at all), you can use ffmpeg: https://superuser.com/a/825289/519232 - ignore "linux" in title, it will work just the same in Windows (except in batch files - then you need to replace % with %%).
It should be blazing fast, as it just splits it, without reencoding i.e. ffmpeg -i input.mp4 -c copy -map 0 -segment_time 8 -f segment output%03d.mp4 - it doesn't work well in AVI (because limitations I mentioned), but if you'd think about mode modern format, like mp4 or mkv it will work well. It won't be precise split, as a result of the lack of recompression.
If you want other settings, take look at manual: https://www.ffmpeg.org/ffmpeg-formats.html#segment_002c-stream_005fsegment_002c-ssegment