Do you just want to change the container to AVI, or reencode using different codecs? ALLtoAVI or Avidemux should do it if you want to reencode. If you want to just change the container, you can also use Avidemux. Here is a guide for alltoAVI http://jcafe.vnmanga.com/index.php/topic,1636.0.html
anyone here knows what is the best software to convert MKV (720p/1080p) to divx/mp4 without loss and can play in PS3
If you want to preserve the quality, then you don't encode to Divx, you just change the container and audio. Try this tool: http://www.videohelp.com/tools/GOTSent
