SVCD is by is vary nature a lower quallity format than most xvid's. Plus you would have to re-encode the file so there will be a small loss in quallity(probably not vary noticable though). Also a 700mb AVI is going to be a much larger SVCD(you get about I think 30 min to a single 700Mb CD in SVCD)
Iam pretty sure TMPGenc
can encode from a xvid source but I am not sure about that because I have not done it in awhile.
There is also a second problem mind you. Encoding into an Mpeg2 format like SVCD is not free(No one makes a free Mpeg2 encoder). The best you can do semi free and legally is to use the latest TMPGenc Trail.
Hope thats of some help. I don't have much experiance in the area mind you as I never really got into it(Not big on having my rig tied up for hours doing an SVCD or VCD encode)