TMPGEnc will do it, as well as probably 20 other applications from AVID, Pinnacle, Vegas, and Adobe Premiere etc. With TMPGEnc you would need the MPEG2 plugin as well (I think) and it is by MainConcept (perhaps it is bundled with TMPGEnc now. It might be better to convert to VCD, or SVCD if your DVD player supports those formats. I have two set top dvd players that do...Samsung, and Phillips. Additionally, they do sell a dvd player that supports divx - but I think it was a bit pricey.
Edit...I just noticed your sig. Just go buy an s-video cable and play the divx thru your 8887, and output to your TV thru the s-video cable....you can hook the audio up by running a mini plug out of the 8887 speaker, or headphone (amplified) jack to your stereo aux in...or just hook up external speakers to the 8887. I did this for years with my old dell until I started building HTPC's.