DivX, if I've heard correctly, is open source. That means less likelihood of legal issues.
Also, doesn't Windows Media use .wmv? If that's true, I've seen many programs support .AVI output with a codec, but not so many that support .wmv output.
On in-game cutscenes, it seems to me that many of the programmers want to use them, while the larger campaign makers want true cutscenes. I lean towards rendered cutscenes myself, since you can make a FS-quality movie pretty easily with 3DS or Lightwave, as far as I know. Certainly, it's possible to do in-game cutscenes, but doing them with SEXPs will end up being unwieldy.