In mencoder you are encode via VfW or CLI? I don't use mencoder, so I don't know. But I do know that you can't just place Mpeg4 CLI encoded video into AVI files. There are errors when it Directshow tries to render the frames. Try to place your Xvid encode inside a MP4 container using YAMB. This should help you see if its your video, or if its your video in wrong container.
If it does play in MPC after you mux to MP4, then that means that you will have to convert the Xvid file to an AVI compatible file (which I don't know what program does that, maybe AVC2AVI?). If it doesn't play, then your file is borked in some weird way...
That's my best guess, and probably not a good one. But at least a start