One of the beauty of OS X is that it offers a plethora of tools to do almost everything you could want. Here's another great example: by using the tools that come out of the box (or almost) with OS X you can convert an AVI movie file to a DVD to watch on your TV.
1) Open the AVI with QuickTime Player. If you can't open it, you may need additional codecs. I suggest you get Perian which include almost every codec you may ever need. (That's the only piece you'll need).
2) From QuickTime, save the movie in .mov format.
3) Copy the .mov file to your iTunes Library. Open iTunes and just drag the files to the Library section.
4) Open iDVD, (you can create your DVD in multiple ways but here's one). Choose Magic iDVD, in the right pane, choose the Films tab, choose iTunes and select/drag the film in the left pane. Click the Burn icon on the bottom right corner. You'll probably need to adapt the Project/Properties and voilà! Pop in a blank DVD and have a good movie night.