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The first thing you will need is a movie editing program, even something as simple as Windows Movie maker or iMovie. You can drag an AVI file into these programs and add different tracks including music, narration, graphic overlays, etc.

If you have a PC microphone you might even be able to record audio right in Movie Maker or iMovie as you preview the movie. If not, you'll need to use something like Windows Sound Recorder to create the audio track, then drag that track into your movie project file.

Sound Recorder and Windows movie maker are included in Windows. If you don't have them installed you can also get them free online. I think iMovie is also standard with most Mac OS.

You could also try Virtualdub.

Or if it is still available on portableapps.org the portable version.  The advantage being that you can then take your virtualdub with you on a USB drive anywhere you happen to go.

For overdubbing Windows Movie Maker is great. It's what I use to make my travel vids (http://www.youtube.com/user/MattIn3rtia ;-)) and it dead easy. But I've started to see limitations so I was thinking about getting something a bit more robust. Anyone used Adobe Premier?

I have this exact same problem for a segment of video for my next travelling vid. As far as I can see the best thing to do is extract the audio using any of the free extractors out there and then edit the sound file using something like soundforge, abelton, cubase etc.