I generally use either "SUPER" which is a freeware video converter that works with just about anything, or "VLC Media Player" (Also Free) which has a very nice built-in conversion program as well.
I'm surprised that iMovie can't open an AVI file, I figured the AVI format was pretty standard, and I thought it was an open-source format as well so there wouldn't be any licensing issues (Like MP3 format)... quite odd...
