iDVD is for burning movies that'll be viewable in a DVD player, however, I'm not 100% sure that you want the file to be an AVI either.
To make a DVD you need your video to be DVNTSC at 720x480 at 29.9 FPS.
That may be a mouthful, but its pretty straight forward if you can manage to make the file import-able by iDVD or iMovie for that matter.
You can try Handbrake, which is NOT a DVD burner, but a video transcoder. Handbrake's main use is compressing video to MPEG4 and H.264. Both of which you should be able to import with iMovie or iDVD (not sure about the latter because I have yet to use iDVD on my new machine). I also am not sure Handbrake will read your DIVX files, but its worth a shot.
Another thing you can do is download the DIVX plugin for Quicktime, which will allow you to view the DIVX files (you may already have this, I don't know) then purchase Quicktime Pro
and export the movie to match the specs I've listed above.