Found the solution to my problem and am posting just in case it can help anyone in a similar instance in the future. Though I did not have DivX installed, I did have shark007's codecs installed on my desktop and this was causing the problem. I found a solution from androidcentral (Sorry I cant submit a link to the forum, my account here is new):
"Howdy again, If you are using the Shark 007 Codec Pack in Win7 x64, open the Settings Application x64 file (Run as Administrator) and go to the MKV Tab, then Tick the Disable the DivX Media Foundation splitter. The DivX MF splitter will do the thumbnailing when enabled box and this will allow you to copy and paste or send to the Nexus. Tested and working well. Hope this also helps!"
Hope this helps!