1. I can't really comment on this, but my phone has half the resolution and it's readable. It should be at least comparable (better) than your Pocket PC.
2. mplayer can play the rm/rmvb containers provided the correct codec.
3. AVI is a container format. Just by context, it sounds like we're playing 640x480 and higher video encoded with DivX/Xvid. It can play it, but it'll be choppy.