Go into the device manager and check under Sound, Video and Game controllers, under Video select Properties, youll find your video codecs there. Check the properties on each one, you may find interesting options. Or you may find that some odd codec has put itself at the top of the list. I thought you could reorder them but you cant.. my bad. I think the 1st one on the list that claims to be able to decode the file is used, even though several in the list may work. You may want to reinstall the latest divx or Xvid and see if that helps.
Divx comes with a configuration utility. Check the setting there, especially the double buffering and extended modes. When set wrong I get double screens in some avis too. Cant remeber offhand what setting it was though.
Nero probably uses those codecs when converting the avi to mpeg (dvd). Dunno for sure as I dont use it.
Also grab GSpot
http://www.headbands.com/gspot/
it tells you exactly what codecs you have and which one can be used for a given vid file.