a couple of options here.

this is how i used to do it:
create a folder for each movie and put a default.jpg of the movie poster in the folder and make an alias to the folder in your movies directory

but i like this way better:
open each avi in quicktime, and save as a reference movie in the movies folder. then drag them all into itunes. then you can add poster artwork via get info

this video doesnt show the itunes bit. but once the reference movie is in the movies folder, it will play in front row

oh yeah, dont forget to install perian and divx