Kbase Article of the Week: Using .AVI Files in iDVD →

Apple Support:

The .AVI (Audio Video Interleave) file format is a container format which may contain audio and video codecs (compression formats) not supported by QuickTime and therefore not supported in iDVD.

In some cases, you may encounter issues with audio or video when adding .AVI assets to an iDVD project, or when attempting to burn a DVD or create a disc image from that project.