Its not possible to convert a .dm_69 file to another format, because by its nature it is not a video file. Its just a big collection of data about what is happening in the game that gets rendered using the game itself.
You can, however, work around it just like David mentioned. while running the .dm_69 demo, use the /video command and an .avi will be created.
/record ... will produce a .dm_69 file
/video ... will produce an .avi file that i assume is what you are after.