What's the extension of the file? iTunes won't import all formats of video. Only MPeg 4 & H.264 which is a variation of Mpeg 4.

Try adding the file manually. ie: drag & drop onto the movie icon on iTunes. If it won't import then it's not compatible. Unfortunately mpeg/mpg can mean any of the mpegs, mpeg 1, 2 or 4. Open the file in QuickTime player & command i, & see what type of file it says it is.