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hmmm - are you able to open a normal mpeg2file from your computer and play that in encore ?? You should - if not theres a problem with your installation of the drivers/software for the DXR-2
If you are able to - then you need to take the mpegfile off the svcd-cd, and remux it to mpeg2 using tmpgenc's mpgtools, then you should be able to play it off the harddrive to tv with dxr-2 and encore.
But you will never be able to play a standard svcd-cd with the dxr-2 and encore. It never supported it and there has been no updates to the software for years to enable it. I beleive the software for the newer "similar" product Realmagic Hollywood Plus or the Realmagic Xcard (also supports divx/mpeg4) does support SVCD-titles.