But you have to have a DS2...it's a flashcard. If you have a normal card, you need to convert your movies to .dpg which is a pain in the butt and they don't play very well.
There are only two homebrew video players capable of AVI that I know of. They are tunavids and an old video player from abaraxas (I am not sure if it later became tunavids under a different dev- lines were blurred shall we say and tunavids is far superior). These require specially encoded xvid videos and quality is less than the far more common moonshell and DGP videos- http://wiki.gbatemp.net/wiki/Moonshell
There are other options with DSM being the only one I would call a competitor- it eschewed serious compression in favour of massive file sizes and gained something of a quality boost as a result. That nobody really uses it when moonshell exists pretty much says it all though.
A couple of the enhanced flash carts- the iplayer, the iSMM (iSmart MM) and supercard DSTWO have avi players as part of their onboard enhanced players (they have extra chips in the cards themselves to help with decoding). These are quite capable of playing scene style AVI (XVID/DIVX) videos among other formats and do so very well (they are all pretty much the same thing/based on the same code)- testing the iSMM player it dealt with things I have seen lesser "proper" video players choke on.
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