Stoob, for a long time on my iPod video I've download .AVI files and they work fine. I believe that those are Divx files as I got them of torrent sites. Maybe I am wrong.
The only thing that right now it is not using the video hardware accelerator (low power) the iPod video has and it uses the main cpu to do the decoding, which means it wastes battery.
Lammarite, to do the install easier use this the new utility they have. Doing it manually can be a hassle.
RockboxUtility < Main < TWiki
Also downloading the build for your player maybe slow at so be patient.
Just a reminder to all, Rockbox removes all sound filtering, which means you get totally clear and unadulterated sound out of the player including the very high frequencies. Don't turn up the volume if you are in a noisy place or you could get a tingling feeling in your ear drums and with time leave yourself deaf.