So if the XviD isn't an avi what container does it use? mkv? ogm? mp4?
If you do use VDubMod, then set video to fast recompress, be aware that mpg files generally aren't 1:1 so you either need to resize the avi or set it with the same PAR/DAR as the mpg.
If you are going for a SVCD though then there really is no need to convert to avi's. Just convert directly to a SVCD compliant mpeg.