After clicking the "Demux" button, the "Demux MPA stream" window will come up. Here is where you would need to name the ac3 file VirtualDubMod creates and pick a folder for it to be saved in. When you are naming the file, it is extremely important you type ".AC3" at the end of the file name!
(green). [Screen Shot Below]
After you click the "Save" button, this screen will come up. Its just a status screen. Nothing to do here but watch it. [Screen Shot Below]
Just let it finish and your done. You now have a brand new shiny .AC3 file. [Screen Shot Below]