Divx is up to 6 now.
Usually all a .divx etc file is though is a normal .avi file but some lamer decided to change the extension to misguide people. Renaming them back to .avi should be ok. MPC (and most media players) are clever enough to see through that and detect the correct file type.
When you're burning them to a DVD though, I think you're trying to burn them in such a way that a normal DVD player can read them (probably called Video disc or similar), hence why it's being fussy. Unless you really do want to be making a disc for normal DVD players, you really want to be making a normal data DVD for computers if all you want to do is back the files up.