How does AVI compression (div3 vs div4) affect CCE?

[Alcacia]

I feel like I am missing something regarding the basic way that AVI2SVCD works. I was always under the impression that it used AviSynth as a frameserver. That is, I assumed AviSynth would pass the uncompressed (and generally manipulated/filtered) frames to CCE to encode. Since the decoding is done by AviSynth plug-in, what does the original AVI encoding matter to CCE? I could understand if this was to increase compatibility with AviSynth, but it says on the "Misc" tab of AVI2SVCD that converting divx3 to div4 can "solve CCE problems"

Can any of you experts out there explain this?