In Movie Maker you will need to import the WMV file;
From the Main Menu select File/Import Into Collections

Browse to the WMV file you want to convert. Movie Maker will Import the Clip.

Drag the Clip from the Collection section to the Timeline/Storyboard.

Once on the Storyboard you can convert the file. From the Main Menu select File/Save Movie File

A dialog will open - Select 'My Computer' and press the Next button.
On the next screen you can name the new file and select/browse to a folder to put the file in (remember where you put it because you will need to browse to the file in Premiere Elements to import to you project). When you have named the file and selected the location press the Next button.

On the next screen you will probably have to click on the link that says 'Show More Choices' There should be 3 radio buttons to choose from;
1. Best Quality
2. Best Fit
3. Other Settings
Select #3 Other Settings and under the drop down select DV-AVI(NTSC)

When you press the Next button your AVI file will be created, have fun