Video OS interface problem!?

Updating divX is part of it, which you did, but to play AVI you first need to install or update XviD Codec. Then you should be able to play the video with Windows Media Player. It's also possible that you need to install some other video or audio codecs such as AC3 audio, OGG audio or some other. You can use to find out which. The reason you can use VLC Media Player / Videolan is because codecs are included.