From my very little tests with the avi object, I can confirm that it works, and that there is only one format supported (at least avi containers didn't work for me), and that's the primary avi uncompressed (don't know the exact name).
But, the avi object just shows an avi player with all transport elements visible. If you don't want that, you need to use python. There is a solution from ROJOhound somewhere on the forums.