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As I mentioned to you earlier, I'm somewhat of a novice at these things. Hopefully, someone with more knowledge will join in -- I'd like to learn more myself. It sounds like you already have a good "handle" on things like ISO images and DivX.
Here's a couple other ideas that might help:
Winamp is a great program, and does what it's supposed to very well. I've always liked it, and usually install it on all my PC's. But it's probably not the best choice for what you're trying to do. Sometimes, it's limited by the codecs (audio & video formats) that are available.
VLC Media Player is what you're looking for here. It's one of the best pieces of freeware available anywhere! When I first read your query, I knew immediately where you should start. The hard part was finding some kind of decent explanation (links to those articles below).
Description of VLC Media Player from NoNags (6/6 Rating, Editor's Choice)
If you play a lot of video and use Windows Media Player, you've probably come across a number of files that you can't play, you're told you need to have a codec to handle them. Good luck finding that codec. Instead, try the VLC media player. This software plays pretty much every media type you can think of and likely a few you haven't imagined. Not only will it play audio and video formats, but it will also play DVDs, VCDs, and many streaming protocols.
VLC is kind of a big download (at 18 MB), but then, so is Winamp. It's worth it. :-)
Homepage, VLC Media Player
Supported Formats (Codecs)
If you have a Audio CD, SVCD, or VCD packaged inside a CD-image (ISO), in some cases VLC Media Player can play this without you having to mount it or extract it. You can simply choose "open file" and pick the CD-image.

Here's a good article ... a general intro into DVD ripping. This is a good starting point, and should answer a couple of your questions. Keep in mind, there are several different methods to accomplish this goal -- some legal, some not -- some easy, some "not so hot."
http://lifehacker.com/371636/turn-your-pc-into-a-dvd-ripping-monster
Note: Don't be fooled by the website name, LifeHacker.com. It is NOT a computer hacking site, but rather a "how to live" site (hence the name, "hacking life"). They've always got interesting articles, well worth reading, if you're not already familiar with it.
These next two articles explain the author's small freeware apps, and why you may want to download them. The second one -- DVD Play -- will come in very handy. It's designed to work specifically with VLC Media Player.
http://lifehacker.com/355281/dvd-rip-automates-one+click-dvd-ripping
DVD Rip (small file, 297 KB)
http://lifehacker.com/360658/browse-and-play-your-ripped-dvds-with-dvd-play
DVD Play (small file, 322 KB)
Best wishes. 
Robert ...gratia autem Dei, sum id quod sum
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