PAL Interlaced DVD

Guys, I am about to encode "Star Wars Episode 2" to divx. DVD2AVI says that it is a PAL Interlaced source. I have never encode a Interlaced PAL DVD before (well I don't think I did) Do I have to deinterlace it, and if so, can some point me in the right direction for some information on how to go about deinterlacing. Thanks

So when using VerticalReduceBy2 as deinterlacer you could end up with some field errors, where Telecide would do it's best to correct these? But shouldn't FieldDeinterlace be used instead of Telecide?

OK, it's clearer now. Thanks.