You need VirtualDUB. Run it and load in your MPEG file.
Go to Audio Tab and select Full processing Mode. Click Audio tab again and select Compression. Tag MPEG Layer-3 and select 96kb/s 44.1 Stereo. Then OK.
Click Video tab and select Full Processing Mode if its not selected. Click on Compression and select DivX
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MPEG4 Low-Motion, then OK.
Click on File and Save AVI. Done.
If you dont see the DivX
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Low Motion in the Video Compression list, you will need to install the DivX Codec 3.11a. These are available form this sites DVD download section.