DVDs and SVCDs (i.e. MPEG-1/2) files contain an aspect ratio value, which describes how the player should scale the video stream, so humans won't have egg heads (ex.: 480x480 + 4:3 = 640x480). However when encoding to AVI (DivX) files, you have be aware that AVI headers don't store this value. Rescaling the movie is disgusting and time consuming, there has to be a better way!
MPEG-4 has an unique feature: the video stream can contain its needed aspect ratio. Yes, just like MPEG-1/2 (DVD, SVCD) and H.263 files. Regretfully, there are no video players outside which support this attribute of MPEG-4, except MPlayer.
This feature can be used only with libavcodec's mpeg4 codec. Keep in mind: although MPlayer will correctly play the created file, other players will use the wrong aspect ratio.
You seriously should crop the black bands over and below the movie image. See the man page for the usage of the cropdetect and crop filters.
mencoder sample-svcd.mpg -ovc lavc -lavcopts vcodec=mpeg4:autoaspect -vf crop=714:548:0:14 -oac copy -o output.avi