Check out DC Emulation.com. You should be able to find pleanty of information there.

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I have dreamcast as well, and most of the games I have played were already cracked and you could just play them off the cd-r, no mod-chip or anything. I downloaded them though.

And about divx playback, I haven't tried it but I have viewed vcd movies and the playback was horrible audio and video all out of sync, probably be the same with divx.

Divx on the dreamcast is bad. I've tried it a year or two ago and the software availible then were so bad that opening a divx movie (~600MB+) took nearly a minute. Maybe it was just me..

To play CDR games, be sure you do not have the newer dreamcast revisions. Just burn all the files to one cd, load the DC boot loader, and swap discs. There are also self boot utilities for the PC to make a self booting image, so you can just burn the image for a self booting DC. Like Agent_WD40 said, goto www.dcemulation.com for more info.