I've encountered a lot of people who've had the problem with their Xbox 360 that when they try to play a video file it says that an update is required, but won't let them download it. I thought I'd just post the quick solution to this on an active forum, since it took me ages to figure it out and I'd just give back to the community
It seems that Video features (eg. Video Marketplace) are only available in certain regions (USA, UK, etc), but not in others. Therefore you cannot download the update needed to play video files (divx etc), and it simply gives you the "More Information" option when selecting to download it, yet you never really get to the actual downloading.
So to solve this problem just create a dummy account (does not have to be gold, just needs to be on live) and set the region/area to UK. Try to play an avi file in your video library and it should prompt for the update. Agree and confirm your download (optional media update etc). The feature should now also be enabled on all your other accounts no matter what their region is set to, which should finally allow you to play avi files off a flashdrive or whatever.
Hopefully this helps some people because I know, after searching through tons of forums for a solution, there are a lot of people with this problem.




