Resizing and quality

[Nickmavros]

I recently had a conversation with a friend of mine about resizing and quality.
My friend insisted that if you resize the width (of the avi) to numbers lower than 576 the quality gets very low.He also told me that : even resizing the movie to 640 width you lose many details.
I have read in some magazines and guides that resizing the movie into a smaller size improves the quality of the movie.
In my own experience I noticed that resizing the width lower than 400 the quality does get worst and the movie looks blur. But when I resize the width to numbers between 500-600 the quality is very good because I use Higher bitrate.
I have done many divx movies (using divx 3.11) and this seemed to work fine but with Divx 4.x I am not sure.
Does anyone have any suggestions;

[khp]

Well I think the general rule of thumb is that u must stay above 0.2 bits per pixel with divx4.x, so with one CD transcodings I think resizeing is nesseary.

But if u already have experience with divx3.11 encoding, moving to divx4.x should be relativly easy, just leave the max,min quantizers at default (12,2) and set the bitrate u need for the desired filesize. And I think two-pass encoding is well worth the extra time it takes to encode.