I haven't heard of that error until now, but looked at some threads dealing with the issue

Would this have anything to do with it?

"unable to prepare data for recording: Prepare session failed: Transcoding of videos - Club CD Freaks - Knowledge is Power

From what I found two other reasons could generate that error. Low Memory causing buffer overflow or Bad source files. I would guess the second reason is the one you are looking for.

For more info just write "unable to prepare data for recording"+Nero into Google search, as others have had the same problem.