The purpose of the following thread is to, explain in detail, the process of converting a video file into the proper format so that you can play the video on your Droid--without spending a dime.
1st: obtain your video, Ie: *.avi
2nd: download an Open Source (free) copy of Handbrake
3rd: Open Handbrake
4rth: Click on the "Source" button to select your video from a location on your computer...if it's on a DVD, just select the Disk--not the files within.
5th: Select the IPhone preset. This will adjust the size and resolution automatically.
6th: Click on the "Start" button
7th: Once encoding has finished, plug your Droid into the computer via USB.
8th: Pull down the notification bar on your Droid and select "Turn On USB Storage" this will allow you to read/write files from the Droid--as a regular drive.
9th: In Windows Explorer, navigate to the "F:\DCIM\Camera" folder on your Droid's SD Card. F= your drive letter.
10th: copy and paste your newly converted video file into the "Camera" directory, as defined in step 9.
11th: safely remove the device from Windows.
12th: pull the notification bar back down and select the "Turn off USB Storage"...make sure you've completed step 11..press "turn off"
13th: Navigate to your "gallery" application on the Droid
14th: Navigate to "Camera Videos"
15th: Select your video.
16th: Congrats, your done, enjoy.