I know there are some graphics cards that give some issues indeed, but sometimes there are work-arounds. Search
the forums for older threads, you might find yourself lucky.
However, I'd still recommend you use at least winamp5.01, since avs was updated there. Winamp2 and 5 classic are almost fully compatible. Try if you can copy the 'encoding thing' to the same place in winamp5. Also, Winamp5 is faster and uses less resources.
If, however, you still prefer winamp2, then get 2.91 (or 2.95(unsupported)) from www.winampheaven.net
The lame codec can also be found there, if that's what you meant.