Good news for those who are having problems having troubles with xvid encoded .avi's! Taking a tip, I uninstalled FFDshow and installed the default Divx installation pack.
Although I've always used FFDshow over Divx just due to the bloat included in the divx package, I was having problems with xvid transcoding via TVersity no matter how I installed it. With the divx installation it was as simple as clicking "ok" and every single one of my videos are now working.
Now for the bad news - the divx codec seems to encode slower than the FFDshow codec, so I'm getting the "Server cannot be found" error with just about 80% of my videos for a second or two before they start. If you don't mind using the extra processing power and that little warning in the upper right corner, this might be a good solution for you.