I finally found a media player that can play .AVI without all the choppy playback.
http://www.lonelycatgames.com/?app=smartmovie
I only used the player for the wm6 device by installing the .cab
I have not installed the pc based converter yet and I dont think I will need it.
Every movie I tried on the TCPMP was a nightmare. I always had to convert to .3gp or .mp4 to get it running smoothly but with this player I get smooth playback with any .AVI movie regardles of the size or the sh**y video drivers on the touch.
The only problem. its not free but it has a trial so you can judge for yourselves.