If your videos are definitely MPEG-2 (which you can check with
GSpot, a must-have tool for video freaks) then the problem is the DirectShow filter that you installed. Microsoft's encoding tools are very particular about the filters that they will use, a filter's ability to play an MPEG2 video in Media Player is in no way related to its ability to feed video into Media Encoder or Movie Maker. The ancient filter you found on Codec Corner is a deadend and should be uninstalled, it will not work.
MCored's Recommended DirectShow Configurations has a list of filters that do work with Media Encoder (and Movie Maker BTW) along with the tools needed to check your own configuration. On the same page is a
DirectShow Fix Guide which contains some additional information on solving this problem.
You can obtain working decoders from
Elecard or
Intervideo, in the case of Intervideo you need to download the trial version of WinDVD which will install the decoder for you.