As an experiment, I installed ffdshow and PowerDVD 7, then tried to play a Divx avi in PowerDVD -> CPU usage of 80% on an E6600 running at 3.2GHz!
The same file plays fine using ffdshow in zoomplayer or bsplayer, and PowerDVD plays it fine using the built-in AVI decompressor if I disable Divx in the ffdshow codec page. The problem probably lies with PowerDVD, but this shouldn't be happening at all in the supposedly improved AV environment of Vista.
I agree, VLC is an excellent player, pity it's written in an obscure dialect of Pascal.