Auto GK is an excellent freeware tool to convert mpeg2 to xvid/divx.

i usually set AGK to create the new xvid file at about 15% of the original mpeg filesize. this offers good quality video.

Auto GK uses virtual dub at its core, but the process is
simplified and automated.

http://www.google.com/search?num=50&hl=en&q=%22auto+gordian+knot%22