Cannot embed AVI file

I know this has been asked often and I have searched through the discussions
but I'm still not sure why I cannot embed an avi video using the
Insert>Picture>Video option. Also, I can not embed an mpg file. Do I
actually have to PUBLISH my website to the server before the video will show?
When I click to preview, I get the small square with the red, blue and green
shapes. What am I missing here? I swear I was able to do this before.

I have been told that all the frontpage extensions are installed on the
server.

I was able to embed a wmv file using the wmv plug-in. Just really curious
why the Insert Video option is not working.

Thanks