I have softmodded a xbox and can copy mp3, and jpeg files onto the xbox from a pc using FTP.
I can't figure out how play videos though...can anyone make a suggestion.

Yup, look for a program called XBMC or, XboX Media Center.

Unless you are using a XboX360.. then I can't help ya.

He's using UnleashX at the moment, I'm helping him out just so everyone knows. I was told when I put in UnleashX that it would play AVI Files, is this true?

You would need http://en.wikipedia.org/wiki/Xbox_Media_Center

to play those if I have read right