Hmm ... I don't have win32codec installed. But I can play avi files. I haven't tried DVDs yet, but I think that'll work too, since gstreamer has plugins for that. I believe win32codec is mostly for wmv, asf, and related audio and video encodings (maybe real video and quick time as well[?]). Many AVI files have video streams encoded using the DivX, Xvid, MPEG-4 encoding, so you can actually view those AVI files without having win32codec installed.

Also, older wmv files can be viewed without the win32codec because there are open source implementations of it. Only wmv3 (windows media 9) or higher needs the win32codecs.