If I were you I would just go and look for a DVD player with DIVX encoding built in, I bought one for my bedroom about two years ago from Asda, only cost about £30 and plays almost any movie format downloaded from the internet without having to do any conversion so you get about 7 films per DVD.
Its also worth noting that just about any time you convert any audio or video format you lose quality.
I'm going to get a DIVX player that takes a USB memory stick so I can just grab the movie from my PC and watch it in bed
