I use GordianKnot http://www.afterdawn.com/software/video_software/dvd_tools/gordian_knot.cfm with DivX Pro 5.2.1 (which is XP SP2 compatible). Earlier DivX versions will mess up, if you have SP2 installed! Koepi's XviD is okay (and, it's freeware Doom9 claims he prefers XviD over DivX. GK likes them both just fine.
Well....XviD is now used on pirated movies and tv-rips so I would say XviD (The scene was dominated by DivX in the PAST)