Just use the new xvid4psp 6.0 beta available at www.winnydows.com
It's free, no codecs to worry about and is very easy to encode for N900.
Oh. This is for the Windows users.

(version 6 is still beta so there are many fetaures missing such as creating custom profiles etc from the gui)
(I've been using 4.x version till now and 5.x is now very mature so should be good if u find 6.x a bit lacking)