i agree divx and xvid are only for converting to as a way of saving space on your HD and watching on a divx player or your PC,
encore needs a high quality, uncompressed avi or transcoded video to make up into a DVD...
even if you convert the divx back into uncompressed avi (which will be big) i dont think the quality will be kept, altho i have never tried so it may work - let me know if it does