Playing AVI file with XviD codec crashes my VLC and doesn't play on quick time
The problem had nothing to do with VLC or Xvid.. it was a problem with finder (I should have gotten a hint when I couldn't even install Xvid.. I finally found out there was something wrong with finder when I tried to install sublime text 2 and i got the same bogus behavior)

this problem is common with osx mavericks.. and the solution is to go to ~/Library/Preferences/ and delete com.apple.finder and com.apple.doc (the second one may or may not exist, but that's the instructions i got anyways).. then rebooting your computer..

after that everything works fine.