There is a post on vcdhelp in the DVD ripping forum about this... I believe the following turned out to be the recommended way to go about it:
1. Open up the first .avi in VirtualDub.
2. Save the audio in uncompressed format (File->Save WAV after turning on Audio->Full processing mode)
3. Set Audio->No Audio, and set Video->Direct Stream Copy and save the .avi (this will save the video without audio).
4. Repeat steps 1-3 for the second .avi.
5. For each .avi, mux the no-sound video with the uncompressed audio. (Not sure which tool does the mux here... I think TMPGEnc can do it)
6. Now, load the first remuxed .avi in VirtualDub, then use File->Append AVI to attach the second. Then save out the resulting full avi.
Remember, this will take a huge amount of disk space! Two 700meg DivX files will turn into two ~600meg DivX files + two ~900meg .wav files, and then that amount of space again for the remuxed file (3GB .avi file). Phew! So 1.4GB + 3GB + 3GB = 7.4GB overall. Obviously, you can delete some of this once you're done, but you probably don't want to do that until you know everything works
They did mention that after doing this, if you play the .avi and skip around within it, you might see a/v sync issues. However, after encoding and burning to vcd/svcd, the sync issues seems to disappear. So don't panic if things are out of sync after the combine process.