(1) What is the best codec for to use in virtual dub for surround sound? (2) Also. Is DivX or Xvid better?
AC3 and Lame are different things. Lame is an MP3 encoder, while AC3 is an audio format. xvid is nowadays better than divx, it is also open source.
I read a while back that stand alone dvd players can't read Xvid, is that Still the case? What codec should I use for surround sound for virtual dub?
I don't know about surround sound codec. Most players still don't play mpeg4 unless you buy one that specifically says so.