As of this writing (Nov. 12, 2007), it's not fixed yet. You need to extract the ogg audio, convert it to mp3, and then combinte it with the audioless version of the video to make it playable on VLC.
1. Get the following apps:
D-Vision 3
http://www.objectifmac.com/dvision.php
Audion3
http://www.panic.com/audion/d/Audion%203.0.2.dmg
2. Open D-Vision 3, click the big "Tools" button. Go through "Re-encoding avi/mpg," "Copy/Extract" and perform "Extraction of an audio track." Format should be set to "direct stream." Then D-Vision 3 will produce an audio file with an extension "???" Change the extension to ogg. Perform "Extraction of the video track" also to create an audioless avi file.
3. Open Audion3, and perform "Encode Item" to convert the ogg audio file to mp3.
4. Perform "Tools" / "Add audio track" in D-Vision to combine the converted mp3 audio file and the audioless avi file.
It's weird that you can play the ogg audio file on VLC just fine, but not when combined with avi video.