Yup, you can use other video files just not avatar since it is drm locked to the phone. Last night for example I hooked the phone to a projector and watched zombieland, while wirelessly transmitting the audio to my home theater system.
An abuse of technology sure but it was pretty neat.
Also you can use the video out for surfing the net on your tv and gaming even. Just not the Sims game that is included. But Raging Thunder worked great, as did replica island.
Projector link:
Gigaware