I have the same problem, I have installed V03.02.03 of the Media module into a clean DNNv4.5.3 and when I try to upload an AVI file into the module I get the message...
The File C:\DotNetNuke_2\Website\Portals\0\Walk1.AVI Is A Restricted File Type. Valid File Types Include ( *. swf, *.jpg, *.jpeg, *.jpe, *.gif, *.bmp, *.png, *.doc, *.xls, *.ppt, *.pdf, *.txt, *.xml, *.xsl, *.css, *.zip ). Please Contact Your Hosting Provider If You Need To Upload A File Type Which Is Not Supported.
Documentation for the Media module suggests that AVI should be supported so am I missing a trick here?
With thanks,
Kevin