My understanding of VDub is that it will edit and frameserve AVI's and convert AVI's to Divx. So if you load an Mpeg into VDub then you can convert it to AVI or DivX but you can't get it back to Mpeg-1 or Mpeg-2 again without frameserving to the encoder and re-encoding. So all the dubbing has to be done before the AVI is encoded to Mpeg.
If you have an AVI loaded into VDub and there's a VDub filter that you want to use and can't be done with AviSynth or TMPGEnc then you should dub it with Virtual Dub but you don't have to.
