I tried CineXPlayer, and while it wasn't bad, I still prefer Air Video. Yes, you have to host your AVIs on your main computer, but I find that it handles on-the-fly streaming with ease. There's a free version, too (which is the one I use).
http://itunes.apple.com/us/app/air-video-watch-your-videos/id306550020?mt=8
http://itunes.apple.com/us/app/air-video-watch-your-videos/id306550020?mt=8