clip on timeline will not render - Adobe Premiere

If it's native DV and the project prefs are DV and you aren't adding anything, then it doesn't need to render.
Also, the DigiSuite is designed to output up to 4 streams (layered) of video without rendering. If you want to render out a new avi, then you need to do an Export Timeline->Movie and export to a new file.

Right now I have a jpg (720 X 480) with a cross dissolve that needs to render. It goes through the motions of rendering, but on my preview monitor it still says needs to render and on the timeline the area of the jpg and transition is still red.

When you say "goes through the motions" what do you mean exactly? What are you doing to make it try to render?
The reason I ask is because 6.5 does rendering differently from 6.0 if you are, say, used to rendering by hitting the enter key. With 6.5 you need to hit shift+enter to render the timeline.

I actually go up to the toolbar and click on timeline, scroll down to render work area. What I mean is that is tells me it is building a preview counting the frames and as it gets towards the end of the clip it stops counting the frames and disappears without rendering.

Where do you send your preview files? Also, what is your project codec?

Same as the project. codec is matrox DV/DVCAM

Try setting the scratch disk in your preferences to a different hard drive. Change the project codec to Microsoft DV by starting Premiere while holding down the Ctrl+Shift keys until the load project settings dialog comes up. Then choose a DV-NTSC instead of the Matrox one.

When I try to render now I get an error that my drive might be full. The drive is not full any suggestions?

Is the drive in question a media drive or your system drive?