Don't do this if you have a modchip. You don't need to, and this actually prevents PS2's with some modchips from reading the DVD while the chip is turned on. Modchip users can just burn a normal Data DVD.
DVD Video Discs are playable in your PS2, and because of this, they can be read without a modchip. The PS2 is able to access any other files that happen to be on the disc alongside the video. In order for SMS to read the DVD, we are going to make a dummy DVD Video disc, which we can then fill up with our DivX files. We've already done the hard work of creatig a suitable DVD Video, so all you have to do is burn it with Nero, along with your video files.
Grab the dummy DVD movie here (144k), and unzip it onto the Desktop. or create your own DVD-Video files.
Open Nero. Select DVD, and choose to create a DVD-Video. Press New.
Drag the dummy DVD-Video files into the VIDEO_TS folder on the DVD.
Fill up the rest of the DVD with your favourite DivX and MP3 files.
Burn the DVD. You can now play it using SMS in any unmodified console.