Seems that I solved my problems. Apparently, I unknowingly had the 32-bit version of ffdshow installed along with the 64-bit version. Uninstalled both, then reinstalled 64-bit and encoding DIVX and XVIDs working fine now. Also, Media Player Classic working fine playing all media with codecs installed properly.
Movie I previously encoded was an older mid-80s title which is why quality was not as good as expected. Must have thought quality of original was higher than it was watching title on big screen with upconvert DVD player. Encoded a newer title to both formats and AGK worked like a charm, looked great, and took less than 1 hour. Way faster than my old AMD 64 3000.
Thanks for the recommendation, this site is great!