divx does not edit in PreElements... http://forums.adobe.com/thread/440037
Xvid/Divx are output files, not meant to be edited (variations of the MPEG4 codec, often used for Internet streaming video) so, they mostly do NOT edit well (if at all) in any flavor of Premiere, even if wrapped inside an AVI container
To edit a divx/xvid file, or convert to a format that will edit in Premiere
Good to know that this is an issue for everyone. I'll try converting the video to a format that Premiere Elements accepts. Their documentation ("Adobe Premiere Elements supports codecs that the operating system (Windows, Mac OS) running on your computer supports") isn't very helpful on this issue though.
Some users seem to have had OK luck with DivX & Xvid material, but it appears to only be with the very latest versions of the CODEC's. Usually, one gets just Audio w/ no video. Other times, there might be bad Video, but no Audio. The best that I have seen is with pretty bad Video, and OK Audio, but horribly out of sync, and it is drifting OOS, so tough to correct.
If I am handed either DivX, or Xvid (I do not even bother to check the CODEC version), I just load them into my older, shareware program, DigitalMedia Converter 2.7 (Deskshare), and convert to DV-AVI w/ 48KHz 16-bit PCM/WAV Audio. That program can batch convert, so I just stick all of the files into it, check settings, let it go, and get a cup of coffee - done. Now, Deskshare has newer versions, but I have not tried those, since 2.7 works so well for me. There are also many recommended freeware converters, but I have not tried any of those for many years.