The Sansa is very picky about what file to play and what not. The demo video has the following format:

General #0
Complete name : WAZ.MineToRemember.SansaPlayer.avi
Format : AVI
Format/Info : Audio Video Interleave
Format/Family : RIFF
File size : 20.0 MiB
PlayTime : 3mn 26s
Bit rate : 812 Kbps
Writing application : InterVideo

Video #0
Codec : DivX 5
Codec/Family : MPEG-4
Codec profile : Unknown
Codec settings/Packe : No
Codec settings/BVOP : Yes
Codec settings/QPel : No
Codec settings/GMC : 0
Codec settings/Matri : Default
PlayTime : 3mn 26s
Bit rate : 667 Kbps
Width : 224 pixels
Height : 176 pixels
Display Aspect ratio : 1.273
Frame rate : 20.000 fps
Resolution : 8 bits
Interlacement : Progressive

Audio #0
Codec : MPEG-1 Audio layer 3
PlayTime : 3mn 26s
Bit rate : 128 Kbps
Bit rate mode : CBR
Channel(s) : 2 channels
Sampling rate : 44.1 KHz
Resolution : 16 bits
Writing library : Xing (new)Code language: PHP (php)

Encoding

According to this post the Any Video Converter should be able to convert videos for the FUZE. The Settings are:

• AVI
• 224×176 resolution
• with Xvid or Divx5 codec
• Video: 134kbps, 20fps
• Audio: mp3, 128kbps, 2 channels, 44100khz