From the pinned FAQ, specifically the update part at the bottom.
QUOTE(StrictPuppet @ Jan 14 2008, 04:20 AM)
Q: I have a banned console, how can I get the codec installed?
A: While there are many ways to install the dashboard update on a banned console, there is currently no way to add DivX support in any way other than directly downloading/installing it from LIVE. You may have found a download somewhere on the net that says it is possible to install this manually by placing the files in the required folder on the 360 hdd. This is bogus and does not work, don't waste your time even trying. The codec is DRM locked as explained elsewhere in this FAQ.
Update: If you have a Jtag'd xbox running XBR or Freeboot, you can install/patch the media download to enable divx playback. The files are found @ \Content\0000000000000000\FFFE07DF\00000002\ on partition 3. Unlock these files with YarisSwap 0.3 or other similar tool and you will be able to play divx files again.