Ok, I have the solution to my XVid conversion problem, I also use this method for converting my SCVD/VCD movies to DVD. Anyone is welcome to try this method out. There maybe an easier method then what I am doing now, but for me this works and I get great results and most of all it solved my problem!!

You will need programs
Dr. Divx
TMPGEnc Plus
Author program


Convert your xvid to divx using Dr. Divx, yea that right, this changes the audio format and helps the video processing. I used to change my movies to Divx using virtualdub, virtualdub is great, but Dr. Divx is worth the few coins. Dr. Divx is really an awsome program. This program can convert everything I throw at it to divx and divx is the key to easy conversions to MPEG-2 through TMPGEnc Plus!

If your video has black bars around the accual picture crop the video using Dr. Divx so once you convert to divx, all you are converting is the accual picture in the video and not the black bars!!! But if the video has black bars it tells me that your video is going to end up being 16:9 format, so keep that in mind when you convert the divx to mpeg-2 through TMPGEnc Plus.
Set Dr. Divx to produce 1 file at 800mbs, per xvid/svcd/vcd CD.
You could probably set the Divx to produce 1 file at 680mbs this you could burn to a regular cd for a Divx back up.
check the audio in Dr. Divx to make sure there is sound. You have to have sound if not your screwed! It is the Audio file that gets most people on a xvid conversion. Dr. Divx solves the conversion problem hassle free.

Next Program,
TMPGEnc Plus will be able to handle the Divx to MPEG-2 conversion with out a problem!

once you convert to MPEG-2 use a DVD author program then a Burn to DVD.