Hmmm…let’s give it a try.
First, I’d recommend you to watch your project on a TV. VCD-quality in general really sucks, so if you watch it on a PC it will never look really good, because of the low resolution. So maybe you’re already satisfied if you have seen your project on TV, and I guess that’s what you’re doing it for.
In your scenario, I wouldn’t recommend using DivX as an intermediate codec, it’s not wrong if you use a high bitrate, but just for the convertion you’re doing consider a lossless codec like Huffyuv or use a DV-codec. This might enhance quality in the final product.
I thought that After Effects natively exports MPEG1, but as I did a quick look I have to say that it doesn’t (at least not on my computer).
I don’t know the program you’re using for the convertion avi>vcd. It depends more on the program you’re using for the authoring. If you really want to produce a vcd, I’d recommmend tmpeg. Of course you have to stick to the standard resolution of VCD (352/240). But if you want to have a good quality, I would prefer doing a SVCD or a real DVD, which you can author using a lot of programs (Encore/DVD studio).
Hope that helps a little bit.