Per my comments here on a blog post  I finally succeeded in converting MTS files (from my Sony HD handycam) to AVI files. Here's how to convert them en'masse:
I am using Linux Mint 10, and ffmepg version 0.6-4:0.6-2ubuntu6.1
.) Put all your MTS files in a directory, and cd into that directory.
.) Use ffmepg to find out the highest bitrate used by the MTS files:
ls *.MTS | xargs -n 1 ffmpeg -i 2>&1 | grep bitrate | cut -d : -f 6 | sort -g | tail -n 1
I got 13039 kb/s in my case.
.) Use ffmpeg to do the conversion:
ls *.MTS | xargs -n 1 -I XXXX ffmpeg -i XXXX -b 13000k -ac 2 -ab 256k -deinterlace XXXX.AVI
I used the 13000k value above because in the previous step we found out that the highest value is 13039 kb/s. This will allow us to keep the quality of our videos almost unaltered.
I think that if the actual bitrate of a video is lower than this value, say 8000 kb/s, then ffmpeg will keep that bitrate instead of creating the AVI at 13000 kb/s bitrate, so the AVI filesizes will almost be the same as the MTS files.
This step will result in additional files to be created in the directory where you are; for eg. if you had files a.MTS and b.MTS, this step will create files a.MTS.AVI and b.MTS.AVI.