After importing an AVI file it cannot be added to the timeline, and no other files are able to be imported afterwards.
This behavior can occur when importing an AVI file that is not encoded in TSC2 or TSCC codecs. To get Camtasia back to a working state, close and reopen Camtasia. Moving forward, the best workaround is to convert the AVI file to MP4 using a free tool called Handbrake. The video below explains how to use Handbrake to convert the file.