You clearly do not own an iPad. I've watched a lot of AVI movies on this thing with VLC and Xine for iPad.
Still I'll have to hand it to you, 720p has to be converted to MP4/M4V otherwise the devise will say it'll have problems with playing and asks if you are sure you wanna run it.
SOME AVI movies play without conversion, not all. I've found many that don't play with VLC for the iPad....more than don't that do, in fact.
And don't even get me started on the aspect ratio.
Oh and....