I have a 2.8inch touch screen MP4 player as well that also plays .AVI videos.
The thing is you have to make the videos with the RIGHT SCREENS SIZE or it will play.
Take a look at this post here:
viDrop - free open-source converter for RockChip players.
You can download
viDrop (freeware and created by a member on this board) and with it's presets, select
320x240 and it should work fine.
Let us know how you get on.