I have figured some things out, with the help of Neil and Adam, the developers of WindowBlinds and SkinStudio.
First of all, there is a bug in the current WB build that prevents the animations from showing unless you check the third animation option (Always use the selected animations) in the WindowBlinds configuration.
The AVI needs to use MS-RLE compression, also apparently called RLE8. After trying out about 6 different programs, I discovered that Gif Movie Gear produced perfect AVIs for me every time. I made my animations as animated GIFs, then used Gif Movie Gear to convert them to AVI format. The proper dimensions are 272x60 pixels.
Finally, I was also told that the top left pixel needs to be magic pink. I haven't tried one without that, so I don't know for sure if it's necessary.