Actually, if I remember correctly, several months back, in the older forum, Steve mentioned something like the following.
In order to decode an AVI file, he would have to either buy a license to a package, or build one from scratch. The building of which, I am sure is no small project.
I am not sure if there are any free or open source libraries out now that he could adapt, but, in my experience, even adapting packages to your project is a huge undertaking.
And, I agree, terranim8or does use a method that takes up power, however, it's the only method it can take.
Recommendation:
render your avi then use jashaka or wax to edit. Both have some pretty easy ways to import 3d objects and use avi as their materials.
Sage