well for one thing, .avi, .mkv, .mp4 etc arent codecs are video formats, they are just the container and inside the container is a video stream and one or more audio streams
typically an .avi will have 1 divx or xvid video stream, and 1 .mp3 audio stream
.mkv and .mp4 files usually has .h264 video and .aac audio
but these arent hard and fast rules, i have quite a few .mkv files with xvid/mp3 in them, and even some .avi with .h264
this page details what container/codec combinations the 360 supports:
http://blogs.msdn.co...ayback-faq.aspxi would suggest leaving avi/xvid as-is, mkv you can probably just repack into mp4 without actually converting (so it should go very quickly)