Hello
Well you should just be able to play divx files with VLC just by opening the divx file with VLC... It should just work.
As for lag, what do you mean by lag? The sound lagging behing the video or video glitching? A proper description of the problem would be helpful.
The only problem that I've had watching DVDs with recent versions of VLC has been on my Powerbook where the picture sometimes gets glitchy on things like pans where alot is moving on screen at the same time. Increasing the cache on the DVD input modules fixes this. I had to increase the cache size to 3 seconds to remove all the glitching. It gets around that problem just fine, but does have a side effect of highighting an annoying bug that I'm currently trying to raise
viewtopic.php?t=20484
If it's not that then my suspicion would be your machine, however you don't specify what hardware, OS or drivers that you are using which would again be helpful.
Hope that's helpful to you.
Gavin