Glad it all worked out for you. .avi xvid, or .avi divx will work fine on your player. So will RM, RMVB and some .FLV.
viDrop is a free program that will work well for you: viewtopic.php?f=23&t=1589&start=60
Here's some settings that will work. You can change the video bitrate from around 800 to 1200 or so. As a rule, the higher the bitrate the better the picture is going to be, but also the file size will be higher. When you get to a certain point, you won't notice much or any difference. Say, 1500 might not show any clearer on your player than 1200, so 1200 would be a better choice because it will keep your resulting file size smaller, etc. Hope this helps you out. Once again, glad your player is working for you now.