i captured my video using a DV CAM sony dcr pc110 through firewire...

edited it with vegas video and rendered it as .avi with the following specs.

Audio: 48 KHz, 16-bit, Stereo. PCM (uncompressed).
Video: 29.97 fps, 720x480, Lower field first.
Pixel Aspect Ratio: .909. OpenDML compatible.

used tmpgenc to encode it to both VCD and SVCD formats...

the outcome..

VCD was much to be desired.. with blocks all over...
SVCD was far more better.. more like DVD quality but the blocks were still present...

how do i do away with this problem?

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absolutely!!