Will an image sequence produce a higher quality product than an AVI file?

It depends of wich image format you export. Jpeg , png , targa , etc...
The image sequence is prefered to prevent crash export. if this happen you get what you have rendered , crashing when exporting video file 
will make you all lose. Exporting a movie requires a lot more PC resources , because an excellent quality in avi must be without compression.

PNG is compressed an lossless, so that is what I use. Lossless AVI would indeed create huge files.

With image sequences you can also rerender part of a scene or even a single frame if needed.

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