There is something called GC Mplayer that basically played all the video formats including XViD. YOu basically put the couple of files on a DVD along with the video's you wanted to watch, and booted it in your GC, then you could select the video you wanted.
It worked great, and if it would work with the whole 4.7GB in GC mode, you could get quite a few videos on there. I'm not sure if it works on the wii though.
I think i have a few of the discs laying around, that I can try, although I'm not sure if any of them were bootable(not having to select the dol file).
Use those files and one of the bootable disc creators to make a MFE disc with your xvid movies on it.
You will need to have your video files and mfe-fs.bz2 on the disc, and then have mfe-bo18.dol as the bootable dol.
After you make the disc, just put it in your wii and and boot it from GC mode.
NOTE: Some of the bootable disc makers restrict the file size to 1.4GB(since they were made for the GC), but if you get one that doesn't, you should be able to add as many movies as you want(upto 4.7GB).
EDIT: To make it even easier for you, here is a link to BootableDisc3, something I did quite a while ago that should let you use the full 4.7GB of the DVD. Make sure you read the README file so you know how to use it.
Just make sure you have mfe-fs.bz2 in the first 1.4GB of the disc. TO do that, rename your movie files(just add a letter(after "m" in the alphabet) to the biginning of the file name. For example rename blood-diamond.avi to z_blood-diamond.avi
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