there are apps you can download to solve this. I came across this same issue.. and i still get frustrated when I'm on the go and want to show a buddy something on Youtube and it just pops up sayin that the video can't be played.
I searched the App Market for WMV and then again for Video. Seemed all the reviews for the apps that would play avi, wmv, mp4, etc... were all negative. So it was kinda a shot in the dark to try one. The one i ended up tryin is xflash which downloads as a trial... it works ok... well a lil less than ok, video is a bit jumpy and the sound wasnt quite sync'd up. I believe the full version is like 13 bucks and it supposed to be better but i'm not sold on payin 13bucks extra for an app to make a supposed smart phone play a basic video format