Credit goes to KingJehu @ zunescene
The file below contains two registry hacks that add library & conversion support integrated into the official Zune software.
You need do nothing more than extract files (optionally reading the readme.txt) and double click the .reg files to install them. Press "Ok" when asked.
There is a file for AVI support as well as MPG support.
Any questions you may have should be directed to the author, but before doing so...you should have already read the "readme.txt" :winkle:!
Download it from here:
http://www.jehugames.com/Zune/ZuneAVISupport.rar