Ok, after some research it’s all clear. Apparently the ISME codec is installed as a DirectShow Filter NOT as a Codec. Thats why WMP won’t even touch it.
The fix well very simple, just get GraphEdit that ships with DirectX SDK and use it to convert the avi and make sure you encode it with a proper codec. (Well why didn’t I think of that?)
Anyway hope this helps someone in the future, as this had me stumpt for a while and with no help anywhere. If anyone needs the graph template to do the conversion let us know (if I’m still around that is).
And thanks labish for at least trying
