I too am interested in a Linux solution. And a non-SMC Windows solution.
I have confirmed a working semi-solution found on another thread which is moderately satisfactory, although the audio and video appear to drift in and out of sync (more out than in, but sometimes audio is ahead and other times the video leads!), and the video tends to be a bit stuttery when converted from certain sources (have only had Fuze for a couple weeks now so testing has been only partial). I cannot bear to use SMC and have uninstalled it from my system completely. Multiple reasons, but slow transcoding, lack of batch(?), and requirement that Fuze be plugged in for it to work are just the beginning. I can confirm that their is no need for the *.thm file (it is, as others have pointed out), simply a 224 x 176 jpg with a different extension, and acts as a thumbnail for the same-prefix-named *.avi file.
I have looked high and low for conversion settings, and the only thing I have managed to get to work at all is the $29 WinAVI Video Converter Version 8.0. I use the MENU > FORMAT CONVERT > BATCH CONVERT option, ADD FILES > ANY TO AVI, then choose the source file (seems to accept everything I’ve thrown at it so far, including MiniDV avi captures, m4v, etc, and then I use a Custom Defined Output format (involves setting up custom design, then text editing the ini files to create a new menu option - instructions are in the help files for WinAVI Video converter), then choose the default Codecs (VIDEO: ZGMedia MPEG-4 Encode, AUDIO: ZJMedia Mp3 Encoder, with settings VIDEO FRAME RATE: 20 File Split (deselected) and PICTURE SIZE 224 x 176. I have ticked AUDIO “Enable DirectAC3” (but have not tested what happens with it unselected), SampleRate 44100, BitRate 12800. The audio is superb, but I think there may not be enough data band width for the video, and this likely is causing my video stuttering. I just haven’t found a way to customize the video bit rate with the ZJMedia MPEG-4 Encoder. The “…” option to the right of both ZJMedia codecs seems to be inop on my computer.
Conversion is VERY fast as far as video goes, I am quite impressed actually. I converted over 1.5 hours of m4v files in under 10 minutes. I suspect very little recompression was going on!
Oh, and I cannot view the resulting files on my computer, only on the Fuze (obviously, I have not installed all the necessary codecs).
I think I am using the firmware that came with my Fuze, but am not sure because I upgraded initially, then had problems (video locked up device by trying to play as MP3) and I reinstalled firmware downloaded from SanDisk. It was not real old, but probably not the newest.
I anxiously await firmware that is better documented and allows use of other conversion software. For example, Quicktime Pro doesn’t output mp3 audio with video etc…