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Like almost everybody else, I bought the DSM-320 for its Xvid support, and was sadly disappointed. Video was extremely choppy, ff/rwd didn't work properly, jump resulted in out of sync audio... it was a mess. TVersity helped, but functionality was lost. I followed most of the other forums and messed with bitrate, wired connections... then followed D-Link's advice and began reencoding my videos to Nero Digital. The player does NOT appreciate Nero Digital encoded videos. None of this worked.

I could play raw .vob files over wireless flawlessly, so not wireless/wired problem. Nero Digital ended up out of sync, wrong file sizes, and default settings in Nero 8 don't work (AVC w. mp3 audio... not the right combination). AVI support is printed on the box, and doesn't go much deeper. D-Link support basically asked me to experiment and tell them what works. All in all a very bad experience.

The problem with Xvid, I believe, is a combination of both packed bitstream video stream, and variable bitrate audio. The player just doesn't seem to know what to do with it.

However, I now have flawless playback, using the D-Link supplied server software, no reencoding of video, and only very slight loss of audio quality, in mp4 format. And it only takes about 5-7 minutes to convert a basic AVI file.

Download "avidemux". There's both linux and Windows versions, and they're pretty much identical, and it's free software.

To convert an AVI stream...

Within avidemux, open source video.
Allow the software to strip packed bitstream and create vbr audio map, if prompted.
Set video to "copy", select "mp4" as output format, and "aac" as audio format.
Within audio, choose configure, and choose your desired bitrate (should be a little less than source bitrate).
Under audio filters, set a gain assertion if desired (automatic works nicely). This isn't required, just gives a bit of volume boost.
Click Save, choose a target directory, and name your output. Be sure to include the ".mp4" extension.

To create new movies...

Create your video stream using your favourite software. AVI is required for this solution.
Do not use packed bitstream - it'll get stripped out in post-processing.
When complete, load your video file into avidemux.
Drop down audio menu, main track, and select your file format. If making a movie, External AC3 file is your source.
Follow same steps as above, only in audio filters, choose "Stereo" within mixer if your input audio source is multichannel (like AC3)

This creates a file that DSM-320 is most familiar with, without reencoding video. If you purchased this player and feel like D-Link is leaving you to your own devices, you're not alone. There are some pretty old threads out there with the same questions, and as yet, my experience with D-Link support has been considerably less than helpful.

Happy viewing!!