Convert a DivX or XviD AVI to DVD (afterdawn.com)
This is just one guide I pulled up off a quick google search. You may want to look around for others.
Converting video is not a simple process and quite time consuming as well.
Keep in mind that without some sort of modification, most PS2's will not play "burned" media. So if you do burn some divx->dvd and burn them, they most likely will not be recognized by your PS2.
There are modifications (hardware) as well as utilties (boot cd's like the Gameshark's etc.etc.) that can enable this though.