Hiya Blitz! Welcome to Dungeon Craft.
Let's see, gif files are not supported and for the reasons that Dinonykos listed (lossiness) jpg files are not popular, though they are supported. Png files are the best way to go. I really don't know about avi files, as I haven't done anything with them yet.
Glad you got the overland maps figured out.
The file that controls the 'circle' on the overland map is AreaViewArt.png. As said above, you can make it anything you want, it just needs to be the same size - 16x16.
Icons - there are templates available in the downloads section at SourceForge. What you need to know is as follows:
there are two frames, named 'ready' and 'attack'. The ready frame is always on the left and the attack frame on the right. Both frames must be the same size, which must be a multiple of 48 [pixels]. The color at 0,0 is the transparent color.
I hope this helps.
