My final update on this subject.
So i received an answer to my problem. This is from their reply :
"Designer confirmed that all other parameters except resolution are within specification. So in case customer can reduce the resolution properly, it should work We have tried
"MovaviVideoConverter" and succeeded to downsize the file (320x180). Unfortunately, this is a trial version, so there is a "trial message' hardcoded over the screen."
At first I was pissed. Because they used the first file i sent them, before I knew about the limitation. My second mail had a file converted to 320x240 pixel , and it was an AVI. Second i have a feeling they did even look for any freeware converters, but they did said that "all other program adapted parameters and playback was not possible". Which other parameters they did not tell even after two more emails. So i went a little further , and tried this movaviconverter myself. At first I just wanted a standard resolution 320x240pixels and chose avi profile. And it it not work. From here i was just pissed off. I could not bear to try like this. After almost one month i could not believe it was so freaking hard to just play a video file from usb or sd card.
I sent an email demanding a proper test and solution , or just a refund. At this point i have to mention that my daily work is IT-Administrator and consultant i many areas. So I had to make it clear i know my stuff around and could not accept that this is normal procedure on a unit like this, coz it is not that easy to play a file even for me. Even if it worked in their convertion of 380x180 the unit states it supports a max resolution of 400x240 MPEG-4 AVI like i tried. In between i had to try the same resolution. But i also noticed the codec the avi convertion was using. and it was h.264.Original file was an MP4 hi-res 380p Meaning this is not supported in AVI file format. Only Mpeg4. Looking at the table the MP4 format is supported in h.264. So I changed to MPEG , and IT WORKED. but of course it was converted in s smaller window with large black sides. Like it does not scale up to the screen. So i tried a couple of more resolutions all under 400x240. They worked , and you could see the the window of video was bigger the more I increased. Of course i did some streching as well. So all the big fuss was this codec setting in AVI profiles. Mpeg and H264. This was automatically preserved from the original file for hires i guess.
AVI : Only MPEG
MP4: Both MPEG and H.264
Keep it under 400x200pixels
So from here it starts to clear a little .
My opinion is that PEE did a bad work on this codec stuff. They cant possibly expect that baseline users must put so much work and so complex tasks to be able to play a video file.
Another problem is, the screen resolution is max 400x200. Meaning it should be able to scale up to the screen.area when playing a video file under the maximum support. Larger of course problem of course it does not scale down. The lack of the codec support, and various differences between them, it makes it easy to convert wrong for the unit. I my opinion this is to much to teach somebody with standard use of a computer. Changing parameters from HI resolution to lower , different type of codecs and sound compression, is not something i would see myself doing on a car unit from the dealershop for the mass marked.
Now i know there is nothing wrong with the unit. Now i can finally convert and play files. But i will not buy a software to make this work. I will use different programs and try convertion with the details i know.
Using the suggested program movaviconverter, helped me understand where the problem was and the limitation of such hi-end unit. Looking at the brochure, you can jump of joy with so many goodies and others. Just to find limitation like this which makes it hard to just enjoy the digital world of entertainment.
Must add, Like always, I can be very pushy when i look after solutions and results. I have this from my line of work, but i also can admit when i am wrong. In this case i do not feel i was off topic at all. I may have been a little to strict and demanding, but i also had patience and did a lot of research ,plus lots of try and fail. I did wrote back right after finding out the problem. And i did also apologized for pressing on their buttons. Still , they need to look into this and make something about it, cause from stock , this unit cannot just play a video file from SD or USB storage, which makes this function useless.
I also received a link to this program from them. http://www.xmedia-recode.de/download.html in their last aproach before my email. Which looks to be a cool fereware prog. It has profiles for different devices that can playback video files. including Pioneer Avic and AVH series. I need to have a closer look at this prog coz it looks like a good tool and free and this will be my main tool for the job until a new firmware release with hopefully a fix for this, or I just MOD my unit when i feel safe to do it 
If any of you read my post, thank you very much. I know this is not the most informative post in here, but since i have been a member here, i never posted anything useful to call, but found lots of answers. My old F900BT was modded and it rocked. Hope this little experience of mine may be helpful for lost souls out there waving similar problems. I know i spent many hours on the net, and posting, without finding anything to help.
Have a cool evening. Now i tank my SD-cards and USB stick with music and videos 