Not that it's really relevant in this situation, but I'm pretty sure PAL standard is actually 720 x 576, not 756 x 480.
is a 3 minute clip with audio in a <=10mb file reasonable?
It is possible, but you'll be doing well not to have noticeable quality loss, it just depends what sort of quality loss you're prepared to live with.
For web distribution, WMV may be a better option than DivX. Have a play with the various templates and see which, if any, suit your needs.
If you plan to stick with DivX, one thing you might try is changing your audio format, right now you're using the largest possible, try using Dolby Digital, mpeg 2, or even MP3, that should bring things down a bit.
Lowering the video bitrate will also reduce the file size but will in turn reduce the quality. Page 2 of the following guide (
http://www.divx-digest.com/articles/divx6_setup.html) refers to the bitrate calculator within the DivX codec which will help in determining how to achieve a desired file size. Have a read of the whole article for a detailed look at how the various settings of the DivX codec work.
If you still have the mpeg file, another option would be to try AutoGK (freeware available here -
http://www.autogk.me.uk/modules.php?name=Downloads). This (excellent) converter will allow you to select a desired file size, frame size, and audio format for your DivX file without needing to know all the ins and outs of the DivX codec.
peace.