If you want quality, then nothing can beat apple ipod. Go for 30 GB apple ipod video. It will cost around Rs 13000. In Grey market you can have it even at Rs 11000. It has superb built quality, extremely easy in use and it supports a lot of audio format like MP3, M4A, AAC+.OGG offers much compression than MP3, which means you have more songs with you. The bundled headphone is very good.
It plays video in MOV or MPEG4 AVC format. You can convert your videos using apple iTUNE and transfer them directly into your ipod. Songs can also be transferred using iTUNE. But, WMP, winamp all supports ipod plug-in. You can watch your videos on TV by video output from your ipod.
But, it doesn’t offer extra features like voice recording, FM recording etc.

AVI is the container of video and audio stream. In general the video is encoded into DivX or XVID (MPEG4 based code) codec. So, you need to install a decompressor or decoder of these codec. You can download DivX play bundle from www.divx.com.
Alternatively, you can install FFDSHOW filter from www.digital_digest.com.

In a DVD is encoded into MPEG2 codec and audio is mainly in AC3 codec. Although DVD may contain MP2 (MPEG! layer2) or LPCM stream. But the industry standard is AC3. So, you need to install a MPEG2 video decoder and AC3 filter for playing DVD video properly.
If you have power DVD or WINDVD software, install them. Alternatively, you can install AC3 filter version 1.11 from www.digital_digest.com . FFDSHOW filter can also decode DVD.

Unfortunately, you can’t - using those CDs at least. the problem is that your CDs have the publishers edited version of Red Hat 8 with incorrect file sizes. What you can do is dowenload the correct version from http://www.wiley.com/legacy/combooks/reeata/redhatpubed.