IOS – Submitting to the appstore: Once an app is reviewed by Apple, does it automatically go live on the app store

Well, in my point of view, if the app works 75% of the time playing AVI files, I would try to contact the developer directly, there might be something required (like a plug-in) or a bug that needs fixing. Like it says in the FAQ, if contacting the developer produces no result, then I guess you could ask for a refund.

I have heard that they gave refunds to people who were unhappy before, but it was a last-resort solution if I remember correctly. Also, I presume the App store staff will fight for you more if you paid 100$ for your app, and a little less if you only paid a buck... :-)

By my reading, it doesn't. Which rule do you think it violates?

Section 11 covers In-App Purchases, which Amazon's app doesn't use, and which are only required for "content, functionality, or services in an App". Amazon doesn't let you buy anything to extend their app.

Amazon's app also doesn't allow purchasing ebooks, which is their only product (AFAICT) that might be covered by section 11. They have a note at the bottom of all ebook pages that says "This mobile application does not currently support Kindle downloads, however you may add the item to your Wish List and purchase it using the browser on your device".

Finally, section 20 explicitly prohibits allowing the user to purchase a lottery ticket, which suggests that there is nothing unacceptable about other real-world purchases. Lots of other apps allow them, too, like eBay.