Don't know why You Tube does not accept your.AVI files but try this.
Download Rad from http://www.radgametools.com/bnkdown.htm .
With this program you can change file formats and compress your files as well. Try .AVI to MPEG 4
Use the convert file button, make sure the convert audio option (on the convert page) is checked.
There is a help button on the front page.
( I have only tested .MOV to .AVI so I am not sure it will work for you)
Franco