I want to make a time lapse film from a 1 hour AVI file so need to capture frames
every 5 or 10 seconds.

I can do this manually in Windows Movie Maker but painstakingly slow.

Any software that can do this for me ? Preferably free !

Googled but so far only found software to auto take with digicams.

It's a bit of a pain but- you could do it this way

Batch frame capture using http://www.frame-shots.com/

Put the resultant Frame captures into Virtualdub and make them into a new AVI.... (there are quite a few tutorials in making an aVI from frames using Virtualdub).