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You'll be best off by reading the whole thread/discussion, and not just the guide itself.
5.0.5 is fine, it just means you have a newer version than the guide was written with. However, when you configure DivX you will need to disable B-frames in 5.0.5 as the current Pocket MVP does not support that feature at all.
As for your other messages, you will need to post the exact message, otherwise we really don't have a clue what's going on.
AVI is just a container, similar to MOV. It's the codecs involved with creating the audio and video inside the container that can be a problem sometimes. VirtualDub can only work with codecs that are labeled "Video For Windows" (aka VFW). Some AVIs are produced that use other codecs that are not VFW, so VirtualDub can't open them.
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