We can convert MPEG files to .avi format using mencoder (the in-built encoder in MPlayer).
#mencoder -o movie.avi -ovc xvid -xvidencopts pass=1 -oac mp3lame [MPEG filename]
#mencoder -o movie.avi -ovc xvid -xvidencopts pass=2:bitrate=1400 -oac mp3lame [MPEG filename]
#mencoder -o movie.avi -ovc xvid -xvidencopts pass=1 -oac mp3lame [MPEG filename]
#mencoder -o movie.avi -ovc xvid -xvidencopts pass=2:bitrate=1400 -oac mp3lame [MPEG filename]