Tiger1970: Thanks for all the replys. My tv does support avi video playback and my external HDD is already formatted to FAT32. The only way so far that i have been able to play movies is to connect my external HDD to my computer and stream them from there to the tv. I guess that will have to do for now until i can figure out why it wont work.
Try it with a USB pen drive formatted to exactly the same specs as your HDD
I suspect it is the large drive size that the TV is complaining about,
Also check that you are using the lower of the two USB ports, the upper one is for a USB webcam and will not play nice as a regular port....