Good question. The answer is simple, but not nice to hear. Each codec requires a decompression part to play the video, and each vendor typically has a slightly altered version of any or all of the codecs used. For example, MPEG4 could be used for compression, but what does that really mean? Apple, Windows, Real Media, Adobe all have their own CODEC of MPEG4. So in short, if you use VLC or Windows Media player to play back video, these have installed codecs from these major media vendors. But the DVR manufacturer can't have access to these without paying royalties, which for security video makes no business sense. Plus, less then 20% of systems use audio, and so they drop that part to reduce bandwidth. So in reality Mpeg isn't always Mpeg, even when it is. Make sense? The DVR vendor should offer just the codec in a form that could be loaded on a different system, instead of a full binary.
The second point is your avi. The problem is two-fold. You can't record in uncompressed avi format. You'd get only a few hours on a Tb hard drive, and security applications require days or weeks of recording. Once you have your video in MPEG4, for example, and you have a vandalism you want to export, if you transcode it to avi you lose all evidentiary value, since the video was altered in the transcoding. Plus you might need 15 minutes of video, and uncompressed avi then would have trouble fitting on a DVD. That all said, most credible DVR vendors allow for avi export as a fall back.
Police review is an industry problem. Its not just your DVR. American Dynamics, and a few others, allow for a CD/DVD to playback in any windows system without having to install anything, and with having only user (nor super or admin) rights. This makes it easy. But because of the lack of this feature in many systems, Police in the UK now are requiring DVR manufactures to provide their codec to a independant software house which makes simple and universally compatible playback software.