They play perfectly if I double click the file / or select "open with". However, they do not show up in the library on MC on WMP.
However, I had an idea last night - I had converted these files from MKV files (I'm trying to add as few codecs as possible and all of these files originated on VHS so not huge quality anyway) using divx converter - that created .divx files.
Silly me - I changed the file extension to .avi and problem solved.