For Windows users (or Linux users with VirtualBox and an XP CD!)...

Try using SUPER

I spent about 12 hours tuning the settings, the best ones I found are:
Output Container: AVI
Video Codec: DivX (Version 5.0 at the second screen)
Audio: mp3
ffmpeg or MEncoder both work, try either and see which is fastest/best

IMPORTANT:
video width: 400
video height: 240
bitrate: above 700kbps, I find 750-850 is fine, going up to 1008kbps didn't noticeably increase quality, but slightly increased file size

Hi quality mode on

Audio
44100 (44Khz)
2 channels
128kbps

GO! Encoding the file on a 2GHz Pentium-M Centrino took was about real-time (2hours / DVD). On faster machines it will be significantly reduced.

The playback quality is superb using mplayer, no audio-sync problems, audio quality is also excellent. I listen to the N810 using Sennheiser HD280 Pro headphones, and the sound quality of the DivX file on the N810 is as good as the original from my Sony laptop... go figure!

Hope this helps.. SUPER is pretty good in that I've dragged all sorts of input files, DVDs VCDs xVid 3GP and Youtube flash videos, it re-encodes the lot! For Linux only users, if you can get some sort of DivX encoding working, those resolution settings seem to be the key to low CPU usage and high framerates.