The current WDTV spec only supports WMV 9 files. This is an older codec. I believe that WMV is now up to version 11 or 12. If you ripped the videos in any format than WMV 9, they will not play. It should also be noted that almost all media players only support the WMV 9 codec. Hopefully, WD will fix this in the future.
If you can get MP4 video files, the WDTV will be fine.
I don't know about AVI files.