On a 266 P II you'll never play a decent divx or xvid movie. Even with WMPlayer.
The video information is loaded into video card memory. If the quantity of information is greater than the videocard memory you get an "overlay failed" message. WMP don't use overlay.
Green bars you can get from xvid movie using an older codec. Go to www.xvid.net and download from there xvid 0.9.2