I have an AVI that is from a DV camcorder(interlaced).

When I play it in Windows Media Player, or Power DVD, it looks fine due to the built in deinterlacing of these programs for viewing on the computer monitor, I'm assuming.

My problem:
Trying to create DIVX 5.1 of this AVI with VDUB and encode as interlaced.
But when playing the DIVX AVI, I can see all the jagged edges in Media player and PowerDVD.
Why is it not deinterlacing for playback on PC?

Also:
If I do a basic frameserve of the DV file with AVISYNTH to either Mediaplayer or PowerDVD, I can see the interlaced video(jagged lines). Again, why is it not deinterlacing for playback like when I play the DV file directly

Thanks,
Scott