How can I watch MegaVideo/DivX videos on my jailbroken iPhone 3G?
Flash does not run on any version of the iPhone. You can try using a program like Air Video which will live transcode your DiVX files into a format the iPhone will play back using your computer.

As for playing it natively on your iPhone, VLC (Video Lan Client) is working on a native client but it's not available in the App Store yet.