Use MediaCoder to transcode your movies to XviD Format. Download it at http://mediacoder.sourceforge.net
Once you have it installed, click the extensions button and select the "Samsung YP-P2" in the list of Options for Portable Media Players. Add your files using the Add Button and then press preview in the extension window to ensure they will work. If they do, press start and wait. If it saves it with an .svi extension instead of .avi, then you know you've done it correctly.
Edit: I changed the original post because it was confusing EVERYONE. -Sassafras