Have you tried tovid? (http://tovid.sourceforge.net/
It is just a script, with pretty few dependencies. I have made quiet a few SVCD's from DivX files and they work perfectly. just do
tovid -svcd -full MyFile.avi MyFile.SVCD
and it will spit out an SVCD compatible mpg file that you can burn with K3b (get vcdimager first though).
PS: The "-full" means that MyFile.avi's aspect ratio is 4:3 (full
screen) and the "MyFile.SVCD" is the prefix of the output file. The tovid documentation or running tovid without any parameters explain things well.